Thousands of businesses signed for new equipment at the show, but what will truly catalyse a whirlwind of sales activity for suppliers in the coming months is the volume of leads made during those two weeks.

The majority of print firms will have signalled their intent to invest, but many (cash-rich businesses aside) will be relying on a successful loan application to help secure that much-needed new investment.

Discouraging research
Recent research, however, isn’t promising. The Bank of England Agents’ report last month revealed that some banks are refusing to lend to SMEs while others are charging increased fees for refinancing existing loans.

Its findings also uncovered the growing trend for businesses to seek alternative sources of funding, such as backing from business angels or peer-to-peer arrangements.

And this month, announcing a raft of proposals on how it plans to promote funding to small-to-medium-sized businesses, the government has signalled its support for these alternative lending streams.

Pertinent to UK print businesses is the involvement of the Department for Business, Innovation and Skills (BIS), which will invest up to £100m through the aforementioned peer-to-peer platforms, supply chain finance and mezzanine finance routes.

But just how will the peer-to-peer method work and – more importantly – how will it benefit UK print firms, if at all?

Peer-to-peer lending allows investors to lend money directly to SMEs and the formal bidding process for the allocated government funding opened last Thursday (6 June).  Among those expected to be competing for a part of the £100m are companies such as Funding Circle, MarketInvoice and Birmingham-based ThinCats.

Having secured £200,000 from ThinCats last year, West Midlands-based label manufacturer Customark is a firm supporter of alternative lending methods.

Greg Lerigo, managing director of the 44-staff firm, which also has a site in Wiltshire, says Customark turned to the lending platform to help it fund an acquisition.

"We wanted to buy Oxford Padprint Techniques outright and fund it primarily using cashflow from the business," he says. "Unfortunately, the banks aren’t keen to lend this kind of capital, preferring to fund much larger acquisitions."

Lerigo says he would recommend peer-to-peer lending "without hesitation" because it can offer immediate access to funding without the need for banks.

"For me, it puts a price on money and you ask yourself if it’s worth it," he adds. "If the answer is ‘yes’, then you make that decision. We’ve grown 15% on last year and continue to be acquisitive. 2012 has been good so far and would turn to peer lending again if need be."

BPIF public affairs adviser Andrew Brown agrees that it is positive to have another option for small firms to gain access to funds. He stopped short, however, of giving the scheme a full vote of confidence.

"There is evidence that equipment in the industry is becoming over-extended because people are prolonging the lifetime of their kit," he said. "They are delaying investment decisions or struggling to get loans, so this method provides another potential financing stream for them," he said.

However, Brown warned that a big issue remained regarding the ability of the borrowing company to repay the loan in the current market conditions and said businesses should investigate all options.

"Companies would be well-advised to take the time to shop around," he said. "The lending market is changing; there are smaller banks that only do commercial lending that are keen to win new business and are willing to cut a good deal."

Deal Bureau director Gerry Hoare says that it is positive the government is making strides to open up alternative finance routes for SMEs. He adds, though, that he is far from convinced that the latest measures will impact UK print businesses.

"Peer-to-peer lending through internet finance firms is viable for many firms, but the loans on offer for printers may be too small to fund higher-end investments," he says.

According to Hoare, mezzanine finance – a hybrid of debt and equity financing – would be a more suitable path for UK printers pursuing alternative means of finance to take. But all three options (peer-to-peer, mezzanine and supply chain finance) are "fundamentally flawed," he said.

"The cynic has to ask if this is another PR spin in a bid to inject a feel-good mentality in the economy rather than a measure that will result in a tangible improvement to many businesses," he says.

Effective route
A more effective route of providing printers with the funds they need, in Hoare’s opinion, would be for the government to set up loan fund transactions directly with businesses, thereby removing third parties and the hurdles that are currently in place for companies.

"I’ve been asking why this hasn’t been set-up for a long while now, and am still no closer to getting an answer," he adds. Print companies need efficient, direct access to funding. Most don’t have months to navigate the raft of barriers to them with so-called "managed funds" and of the latest alternative proposals, I don’t see any great benefit either."

30-SECOND BRIEFING: THE OPTIONS AVAILABLE TO YOU

• Supply chain finance broadly refers to finance instruments which help businesses in a supply chain improve their cash flow by managing payments to suppliers
• These techniques can be as simple as extending payment terms to suppliers, or as sophisticated as an end-buyer extending the strength of its credit rating to businesses within its supply chain, which can then use it to borrow cost-effectively from a financial institution
• Peer-to-peer lending is a means by which borrowers and lenders can transact directly with each other without traditional financial intermediaries such as banks. This is mostly done using an online platform
• Mezzanine finance is a hybrid of debt and equity financing that is often used to finance high growth businesses. Typically, the loan takes the form of subordinated debt, the interest on which is often repaid at the end of the term. The return to the lender will be higher than for senior bank debt, but lower than for equity

READER REACTION: Could the newly proposed lending platforms benefit SMEs?

Stuart Mason
Managing director,
Inkshop Printing
"Any assistance is a good thing to open up the lending channels. While our experience this year has been that traditional lending avenues have been open (we have spent £1.4m), we know lenders are still hesitant to lend to print and SMEs.  We’ve found a diminishing appetite for traditional lenders to fund digital print equipment. However, the crucial element will be rates. I hope SMEs would not pay way over market rates just for the available funds. If a business sector is ‘high risk’, I can see these rates being extremely high. Banks and traditional lenders need to stop paying big bonuses and start lending again."

Tim Hill
Managing director,
Speedscreen
"I investigated grant funding via the RGF (Regional Growth Fund) because a friend of mine received a 25% grant (£136,000) toward a large flat-bed digital press in a £550,000 investment. But, with the banks involved, you have to meet certain criteria – employing new staff as part of the deal or ensuring continued employment for staff that were under threat for whatever reason. In our case, this meant a switch from analogue printing to more digital printing, by redeploying and retraining some staff. The scheme is a farce: if I banked with a certain bank we’d receive it, but with our current bank we don’t qualify."

Mike Handley
Owner,
Graphic Results
"I believe that platforms such as peer-to-peer lending enable you to spread the risk and get a better rate of return than if money Is left in the bank. For a print business, I think that it makes the process win/win, as it offers more of a choice than is currently available to fund an investment and – hopefully – a more accessible route to it. As long as the business is creditworthy, then it acts as a more direct method to finance new equipment, acquisitions or expansion. I am all for it."

– Read Funding Circle CEO and co-founder Samir Desai's comment here