25 June 2019

Which low-risk finance products are print firms turning to in 2019?

Graeme Lipman, director at BTG Advisory, works with a variety of printing and packaging firms, from independent high-street operations to major multinational printworks. Here, Graeme gives us the lowdown on how print companies are using a range of finance options in 2019...

Interest rates in 2019 are still extremely low - not as low as 2017 - but low nonetheless, particularly compared to ten years ago when they sat at eight times the current rate. That means there are finance and funding deals to be had - particularly in the print sector where there are usually assets that can act as security for a lender.

What we're seeing in the first half of this year is a rise in the amount of applications in lower risk finance, particularly with Brexit looming unpredictably over all UK sectors. Finance products of this nature tend to include asset refinance and invoice finance; both would be deemed lower risk because there is some security there to fall back on. With asset finance, that might be a printing press or other piece of plant or machinery. With invoice finance, it would be as described; an invoice payment due into the business. Finance of this nature is less risky compared to a personally guaranteed bank loan, for example.

Asset Finance
The equipment and machinery that your business currently owns represents a considerable investment. Asset refinance lets you repurpose that investment to finance any aspect of your business and get a sharp increase in working capital, while still having full use of machinery itself. How this works is that the lender will buy the asset from you, providing you with a cash sum. You then buy the asset back which provides a boost to cash flow and a new finance arrangement.

Invoice Finance
We know that cash flow is a challenge in the print industry. Customers habitually expect 90-day payment terms, whilst paper suppliers demand faster payment. This can make cash flow unbalanced which could lead to bigger financial problems. Invoice Factoring is a common form of Invoice Finance and essentially brings in the cash virtually as soon as a job is finished and an invoice issued. This ensures that cash flow automatically keeps pace with the level of work you are doing.

Just recently I was approached by a print company who were looking for a factoring facility of £700-500k. They had an existing factoring facility in place, but were having difficulties in the form of cost and a bad relationship between the business and the factor which included very stringent capping limits, a poor understanding of the print sector, and a lack of flexibility with some overpayments. This was all rectified by us lifting out the current factor and replacing with a new facility. All the issues that they had are now rectified and they have saved a vast amount of money and now have happier clients too. The business is now using the additional working capital to grow for a positive future.

For more information on finance solutions in the print sector, feel free to contact Graeme Lipman on 01722 435 190 or email him at [email protected]