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Market Trends

A helping hand

Buying new equipment and bigger space can be a daunting and costly process. Carys Evans looks at the alternative ways to access finance to support your growth and expansion plans

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A range of financial support is available to print firms wanting to expand and grow

A helping hand

With markets such as finishing, packaging and direct-to-garment printing causing the print industry to grow at an impressive pace, print companies are constantly looking to see which area to move into next to expand offerings.

In order to accommodate ambitious growth plans, buying in new machinery and increasing capacity is a necessary part of the process. However, this can be very costly and such expansion will often require some form of financial support.

As the industry continues to evolve, print finance companies are increasingly seeing firms making capital investment plans to ensure they remain at the forefront of development.

A look at the options

In order to expand into new markets, grow business, achieve faster turnarounds, and take on more jobs, various investments are needed.

From a basic inkjet capable of a wide range of short-run tasks costing just a few thousand pounds, to a very large offset printer costing millions, the equipment needed will depend on a business’ individual plans. There are different types of finance that can be accessed to help facilitate these goals.

There is advice and support available for all aspects of business, from machines to software   

Hire purchase is a simple way to buy an asset and spread the cost over a defined amount of time. A payment plan allows businesses to pay in instalments. When the plan is finished, the firm has full ownership on the item.

The benefit of a hire purchase is more flexible than a conventional loan and is often used to purchase larger pieces of equipment with a resale value. A flexible payment also makes room for fluctuations in business.

Although hire purchases can make purchasing more expensive equipment feasible, finance company, Rangewell warns of hidden costs. On its website, the firm states: “Equipment suppliers will often offer hire purchase arrangements to help them close a deal.

“These can sound very attractive and can even include 0% finance options. While these look attractive, at Rangewell we have found that there can actually be hidden costs. You may be able to save money by arranging finance yourself.”

Another option is a finance lease. Similar to a rental agreement, the finance company buys the asset and rents it to the business over the duration of the lease contract. This means it can be accessed straight away and will only cost a fraction of the total amount up front.

At the end of the contract the business can continue renting, return or replace the equipment, sell the asset or return the asset and terminate the rental agreement. Through finance leases, businesses can protect working capital by accessing equipment quickly without any significant initial investment.

O Factoid: According to UK Finance, the number of larger SMEs (those with yearly turnovers in excess of £10m) accessing asset-based lending increased by 13% in 2018. O

Pre-owned equipment can be another way to make major savings compared with new equipment. Investing in pre-owned kit can sometimes mean you save money twice – with both a reduced purchase price and, secondly, by spreading the cost of finance.

In order to expand and increase the services a business can offer, a strategic step can be to move into larger premises. This is particularly important if a business is planning to invest in large equipment. Leasing a suitable industrial unit can be the simplest option. However, once established, it is possible to purchase suitable premises with a Commercial Mortgage – this decreases monthly outgoings and provides businesses with a valuable asset for the future.

Advice is out there

Compass Business Finance is an independent company specialising in the provision of asset-based finance. The company has a well-established presence within print, having supported the industry for many years through its flexible finance options. Every business it works with is unique, as is the finance solution that Compass is able to provide them with.

David Bunker, Jamie Nelson and Mark Nelson, directors of Compass Business Finance

Mark Nelson, director of Compass Business Finance explains that while businesses require varying types of finance to support them as they grow and expand, there are a whole range of finance options available.

Nelson says: “Compass works with our customers to understand their business and their aspirations in order to help them select the right option or combination of finance options to help their business go further. Navigating the financial landscape can be daunting, there is an ever-increasing range of options available and it’s important to be able to understand what’s going to be best for you.”

Compass Business Finance can be found on the IPIA Village at this year’s Print Show to offer financial advice

The Print Show is the only dedicated printing exhibition in the UK, and is held at the NEC, Birmingham each year. Showcasing every aspect of the production process, from digital, litho, finishing and software solutions through to specialist print related providers, there is something for any area of the print sector.

At last year’s show, Compass Business Finance was on hand to offer advice and support to those wanting to learn more about the financing options available. “Having a stand at The Print Show enabled businesses to easily find and approach us to discuss their investment ideas and options, whilst evaluating what the return on any investment would be to their business,” explains Nelson.

“We had lots of conversations with people seeking to understand the implications of accessing finance on their cash flow, and whether they could afford to upgrade their equipment.

“We were able to help them look at different finance methods and see how each one would impact their cash flow, so that they could make more educated decisions. Whether a machine is £10,000 or £10,000,000, the capital cost appears daunting, but financed the right way it can have a positive effect on all aspects of a business. It was great to be part of the show and we look forward to exhibiting again this year,” Nelson concludes.

An alternative approach

Obtaining finance can be an obstacle for some businesses, due to having no or insufficient security to meet a lender’s normal requirements. If you are met with challenges when seeking finance, there are always alternative routes. Compass Business Finance is also an accredited lender under the British Business Bank’s Enterprise Finance Guarantee (EFG) programme and is able to offer finance to businesses that previously would not have been able to access the finance they require.

Close Brothers Asset Finance offers all of the traditional types of finance including hire purchase and leasing, however, in conjunction with certain suppliers it is also able to offer Consumable Agreements, which – if structured properly – can help a customer match their equipment purchase repayments to cashflow and the consumables they use with it.

Paul Philbrick, sales director for Close Brothers Asset Finance’s print division explains: “Most business owners are fully aware about the various funding sources available to them and our own research confirms that, but it’s not always about finding an alternative ‘way’ to access finance but instead an alternative ‘approach’. With the high cost of capital equipment most companies tend to finance the equipment they purchase over its economic life. This protects their cashflow, which in turn gives a company more financial flexibility in the long term.

Paul Philbrick, sales director for Close Brothers Asset Finance’s print division

“Speaking from the Close Brothers Asset Finance perspective, we spend time engaging with our customers to find meaningful ways to help them. The truth is that sometimes a standard 10% deposit over 60 months isn’t always the best solution – by taking time to understand our customers and their business we try to take the pressure away from any transaction so that they can get on and run their company.”

We try to take the pressure away from any transaction so that they can get on and run their company

Research conducted by Close Brothers indicates that print and packaging firms are confident about being able to access the funds they need in the coming 12 months and not many have been declined finance. “It doesn’t appear as if there are that many challenges standing in the way at this moment in the economic cycle,” says Philbrick. This is a positive indication of the accessibility of finance for companies looking to grow their business and invest in new machinery.

An example of a print firm using finance support to strengthen its business is Taylor Bloxham, a 75-year-old family-run business. In an era of traditional sectors such as print in reported decline, Taylor Bloxham decided to implement a strategy of cost cutting with product innovation.

Known to Close Brothers Asset Finance since 2010, the firm’s chief executive officer, Robert Lockwood met with Philbrick, to discuss available finance options to facilitate the purchase of a new B1 press from Koenig & Bauer to replace two aging Heidelberg presses.

Having reviewed the company’s accounts, Philbrick advised that the most suitable finance solution for the print firm would be a hire purchase product over a 60-month term with the option to purchase the asset fully at the end of the term.

Commenting, Lockwood says: “It can be hard to stay competitive in this industry, but the new printer will allow us to remain at the forefront. We will make significant cost savings on maintenance as well as labour and overtime.

“Working with Paul and the team at Close Brothers has been a smooth and speedy process and it is evident that they really understand the print sector.”

With such a broad range of finance options available to businesses navigating the ever-changing industry that is print, the room for growth and expansion is an attractive reality.

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