Finding Investment Finance
Manufacturers and suppliers have a vested interest in helping you find funding for new equipment. So should you turn to them in these tough economic times?
Probably best known for its financial services is HP (via HPFS). According to Nancy Janes, UK and Ireland large format country manager, during the current financial year, 85% of sales in sign and display alone have been financed through HPFS. "HP sales teams are working with customers to understand the customer's business so that the best, realistic package can be created. This synergy is good for our customers, good for their customers, and good for HP." Others think similarly.
The HPFS model is based on financing equipment through leasing programmes, enabling you to maintain cashflow while updating or expanding your kit. Epson UK is one of a growing band of suppliers doing something similar. It has a new lease programme specifically for its Stylus Pro GS6000 which includes service and maintenance for three years and gives you the option to buy the printer at the end of the contract. Essentially, the more you print, the less you pay. Monthly costs range from ?495 - ?695 covering print volumes from less than 200m2/month to 400+m2/month.
Mark Keeley, managing director of Velmex, one of the UK's largest distributors of Canon's imagePrograf printer range, acknowledges that leasing may not be to everyone's taste but sees it as a route worth considering. "The problem most printers face is that they acquire equipment on lease rental deals. Whilst this gives them the benefit of spreading the repayments, offsetting their machinery costs and reducing obsolescence, it also means they have no asset value in the business making it much harder to secure finance. Typically a printer may have to raise ?15,000 to ?20,000 to acquire a Canon imagePrograf 60in printer with all the software and service agreements.
"On the other hand, once the Canon equipment is installed, the lease rental agreement means they only have to produce about three prints a week for the imagePrograf equipment to start generating profit. They can also trade-in the printers at the end of the lease period, meaning they aren't saddled with obsolete kit.
Keeley adds: "With finance being increasingly difficult to raise our resellers and end-customers are working more creatively with independent brokers who will spread the risk of any investment over two or three finance companies."
A close relationship between kit supplier and finance brokers is a key issue raised by Stuart Cole, director of reseller GPT. "Purchasing your next machine from a reseller who has a good relationship with finance brokers can make a critical difference. GPT is an authorised dealer for Lombard but, perhaps more crucially, also has key relationships with a number of brokers that are familiar with wide-format printing equipment."
This can make all the difference to not only having a deal approved, but at a competitive rate - buying a ?20,000 wide-format printer is markedly different to a capex for a similar sum of money on a new IT install, and an understanding of the product's lifespan and return on investment will affect things too. Cole says that after this point, the success of having an application approved is then down to the quality of the customer. "Credit history and existing finance agreements will all have an affect on having a deal approved, but generally speaking, our relationship with the brokers and their understanding of our markets can positively influence the process."
If you are looking to finance new kit purchases it's worth going through the following checklist (provided by HPFS).
Talk to the manufacturers:
They have a vested interest in seeing your business succeed and more are beginning to provide financial services. Also, should the worst happen, a supplier-lender may be in a better position to recover the maximum asset value from equipment, which can reduce the final debt level.
Spread your borrowing:
Apart from having a number of sources to approach for borrowing, if you use several sources you will build up a credit record that you can leverage.
Keep your accounts up to date:
Have your management accounts up-to-date and available. These should include income and cost projections, business development plans, and detailed projected revenues from new equipment.
Make an asset list:
Compile an accurate list of leased and owned assets to share with your potential lender. Provide beginning and ending dates, totals of monthly/annual payments, and have evidence of payment records available to demonstrate your payment track record.
Be prepared to make a deposit:
A deposit is indicative of a number of things: it demonstrates a commitment to your business; it demonstrates your company's ability to save or raise funds on its own; and it forms an important part of a partnership between your company and the lender.
Prepare for directors' guarantees:
As a director you may be asked to guarantee the loan with your own resources. There is room for negotiation here depending on the size of the deposit you can put down.
Seek other funding sources:
While not as readily available as they once were, there is still money available through regional development initiatives but you have to dig around.
Watch for special offers:
Suppliers are as anxious to sell in the current market as you are to buy, so keep your eyes open for special offers.