Over the past three years, the number of banks still open for print business has dwindled to a handful. There isn’t a printer in the industry that won’t have felt the effect of the resultant tightening of credit and, as the recovery takes hold, it is vital that businesses get access to the finance necessary to fund their growth.

FALG managing director Sam Geneen, who has held the position since the firm was founded in 1988, witnessed the energy and enthusiasm of the industry first hand at this year’s Ipex exhibition, where he was a guest of Print Finance managing director Paul Coggins. More importantly, he witnessed the desire of companies from across the sector to invest and no doubt he will have heard of the difficulty that many have had in doing so.

Rothschild Group is by nature cautious; however, in targeting the vacant mid- market, between the high-street banks and the sub-prime lenders (of which its sister firm State Securities is one), FALG has shown an appetite for risk that has been sorely lacking in the print industry.

Significant player
"We will be a mid-market prime lender to SMEs and our intention is to become a significant player," says Geneen.
The withdrawal of credit from the print industry is not a new phenomenon. "There has been a gap in the market for a number of years, with IEF and Hitachi – up to 2005/06 – being the last serious mid-market lender," says Mark Nelson, of Compass Business Finance. The mid market aside, in the aftermath of the credit crunch, the majority of high-street banks have withdrawn – if not fully, then at least in part – from the sector, with many having closed down their broker divisions.

"Before the Credit Crunch, a printer might have had a relationship with a rep at a high-street bank’s print finance division," says Coggins. "Now he finds that not only is the rep not there, but the whole department has closed."

This has dramatically reduced the choice of finance provision and that is what has led to the restriction of credit.

"No one lender can meet all of the funding needs of a customer," says Coggins. "When there are plenty of lenders there is choice. If one lender is unable to increase his limits, another may be able to help. That’s the added value a broker brings.

"But, if there aren’t enough companies accepting brokered business, then the net result is that you may struggle to find finance on terms that suit you, or – and this has often been the case – you simply don’t invest."

Ask any broker and he or she will tell you that good deals have been lost in the past six months because it hasn’t been possible to get the funds in place at the right price for the customer. Banks are demanding bigger deposits, more security and higher rates, all of which has a negative impact on cashflow and therefore makes otherwise viable investments impossible.

Positive impact
The effect of a new entrant willing, in Coggins’ words, to look at "the rationale for the investment" rather than just the balance sheet, could have a very positive impact on the sector.

"A lot of printers have struggled over the past 18 months, but those that have survived have to be fundamentally good businesses," he says. "So, provided the credit is good and the rationale for the investment is sound, we want to be supporting them."

The demand is definitely there, but it will take time for any new funder – even the Rothschild Group – to have an impact on the market.

"It’s positive for the print market as it will add competition during a time when many funders have moved away from the sector," says Nelson. "That said, Print Finance will need to manage this change with a long-term strategy that benefits the right print businesses, while providing long-term viability and profits to Rothschild/Five Arrows."

However, FALG/Print Finance’s impact will not be restricted to the size of its own loan book. As Geneen points out, of equal importance will be the increased competition that the deal will bring to the sector.

"The more players you have, the more choice and the more competition," says Coggins. "The recovery can only be helped by people like Five Arrows coming in."