There are four main routes for financing this kind of deal. First, and most popular, is asset-based lending.
Second, there’s deferred consideration, where you negotiate with the vendor to delay part of the payment. If the price is £1m, you offer, say, £800,000, with the remaining £200,000 payable by standing order over 24 months.
Third is a cashflow loan, where a bank lends against the cash generated by a business annually. These are very difficult to find these days.
Fourth is private equity investment, which is almost impossible to find as the ROI that investors get in the print industry isn’t very good. Venture capitalists such as 3i are shunning the print industry now, unless the business is unusual – for example, something in a different niche or that has a patent.
The first option, asset-based lending, can itself be broken down into three different types.
Firstly, debtor finance, which usually takes the form of confidential invoice discounting, where your customers don’t know anything about it: you can usually raise 80% of your current debts this way.
Secondly, you can look at asset refinance. Most print businesses have valuable print or post-press machines and if they’re unencumbered, with no HP, many finance companies will lend money against them. You can usually raise around 60% of their value.
Thirdly, you can raise a commercial mortgage on your freehold property, which will normally generate about 75% of the value of your freehold.
You can combine more than one method of raising money, but the important thing to remember is that your new business will have a different financial structure from day one and you don’t want to overburden it. It’s important that your business plan reflects three broad futures, which you could summarise as optimistic, pessimistic and the middle course: maintaining the status quo.
Paul Holohan
We are a print management agency looking to develop a roster of in-store POS printers. What are the benefits of large-format litho over the screen process?
We put in our five-colour KBA 205 in November 2006 and we find the benefits are twofold: first, quality, and second, price, although that depends on runlength. Quality is unarguable: with our large-format screen process presses, we can get a maximum 52 lines per inch resolution, whereas on the KBA we can hold a 170-line resolution. And because the dot structure is finer, we get a much more vivid colour on the sheet.
As for price, we’re able to pitch the litho press at roughly the same cost level as our screen presses, but once the runlength goes up above around 800 sheets, you start to see a cost reduction because it’s on the press for a shorter period of time. Our screen presses can produce around 250 sheets per hour, whereas our litho press ticks over at about 3,500 sheets per hour. So there’s an immediate cost saving for the customer. But, even if cost savings don’t kick in, the quality is still there.
We have kept our screen presses, because one of the disadvantages of litho is that you can print substrates only up to – on our KBA, anyway – around 1.2mm thick. Any thicker and they have to go on the screen presses, which can handle up to 10mm, and we still use them to print directly on to foamboard or corrugated. As a result, we now often print litho onto a thin sheet, which we mount up onto foamboard or similar, and obviously there’s a time and materials cost hit with that route. But again, the quality of the image far surpasses that of the direct screen-printed image.
The time hit at the post-press end for us is balanced by the person savings at the feed end of the press: on the screen presses, because the substrates are thicker and heavier, we’d forklift them to the feed end of the press and then handle them into the feeder two or three sheets at a time, which obviously took a lot of time and resource. With the KBA, the pallet is trucked up to the feed and the machine does its own feeding.
Mark Clews
We are thinking of investing in a wide-format digital proofer, mainly for imposition proofing but occasionally for contract proofing too. Do we need a printer with an extended gamut inkset or can we get the results we need with plain old CMYK?
It isn’t quite so simple as just the gamut of your inks. Two things have changed in digital proofing technology over the past two or three years. First, the engine capabilities have improved massively, while the cost has come down. And second, it’s not so much the engine itself that matters in terms of the quality of proof – it’s the workflow that drives it. Canon, Epson, HP etc are all pretty much of a muchness in terms of output quality, speed and colour consistency now.
We use the same basic engine for our Sherpa proofers, whether they’re contract or imposition proofers: the only difference is that we use an extended gamut inkset with light cyan and light magenta for the contract proofer, and standard gamut CMYK for the imposition proofer. Our contract proofing Sherpas also have some high-level consistency features that span three main areas: a colour measuring device that regularly measures a colour strip and is used to recalibrate the proofer; good quality inks manufactured to very strict tolerances; and consistently high quality of special coated paper. The three areas form a system that guarantees the quality of the contract proof.
The other big factor is your workflow system. If you hook up your proofer to a workflow that can provide good screening and colour management capabilities, that will enable the creation of contract proofs rather than imposition proofs via the same basic engine.
If the balance of your requirements was the other way around – that is, if you were doing more contract proofing than imposition – my advice would be to buy a contract proofer and set up a different profile on it to run your occasional imposition work. You could also run cheaper paper. But as you are doing more imposition than contract, I’d advise you either to buy two separate machines, or just an imposition proofer and send out your occasional contract proofs to another printer or a local repro house.
Steve Collins
