But if you’re borrowing to invest in your business there are plenty of other things that you’ll need to consider first. For example, any capital investment decision will need to be justified by results, and that means you’ll need to have some idea of what return your investment will generate.

Marcus Clifford, regional director for the eastern region of the BPIF, says: “Making the right investment decision can be challenging, but it is a process, and the more input and information available the better.

“Companies that get it right will inevitably capture the most profitable opportunities, clients and markets. Companies that don’t will be left to compete on unfavourable terms and smaller returns.” 

Paul Holohan of Richmond Capital Partners adds: “Know which way you want to go for your expansion, and don’t be side-tracked from your plan.

“Buying a piece of equipment is no guarantee of increased business. Any investment should be designed to improve your facilities in order to offer additional services. This means knowing your customers and their needs, and their commercial direction as regards future business.” 

And it seems the print industry agrees that now is a good time to invest: an Attitudes to Business Investment Survey carried out by Lombard Finance earlier this year found that respondents operating in the media section (which includes print) are 68% more confident about the future than they were 12 months ago. Furthermore, more than 51% are investing to secure growth.

As far as potential lenders go, they come in all shapes and sizes. Starting at the top, at least two of the big clearing banks, HSBC and Barclays, are now very SME friendly. Indeed HSBC recently created a whopping £8bn SME lending fund. 

“That fund is an aspiration not a limit,” says Richard Bearman, HSBC’s UK director of small businesses. “And it is available to SMEs right across the UK. There are 18 months of fee-free business banking for start-ups, and 12 months for existing SMEs who switch.

“As you can see, we have a real appetite to help small businesses.”

Rebecca McNeil, head of business lending at Barclays, says: “Barclays offers a wide range of products to help both large firms and SMEs who are looking to grow their business, including working capital products.

“We take an interest in growing markets in your sector, such as the digital press market, where businesses tell us that the extensive electronic composition in digital presses can make them difficult to remarket. However, as the sector expands, new specialist digital printing lines – for example, for book printing and sign printing – should have long economic lives and potentially stronger resale values.”   

Lombard (part of RBS) is the leading asset finance provider in the UK. In 2015 alone it lent £6bn to UK companies.

Ian Wood, head of Lombard finance, says: “Asset finance is all we provide, so we really understand what we are doing. 

“This is helped by our approach to new business, which is to really take time to understand a business and its needs. This allows us the opportunity to find a way to deliver a deal that works for the customer and for Lombard.

“We have a team that focuses specifically on businesses with a turnover of less than £25m. With funding starting from as little £5,000, we lend on any tangible asset you may require, from custom-built printing presses to commercial vehicles.”

So just why has asset finance gained such traction? UK merchant bank and specialist lender, Close Brothers has a division dedicated to print that is headed up by Roger Aust. In its recent report Print & Packaging Financing The Future, it stated the huge advantage of this lending model: “Asset finance offers an alternative way of funding business equipment, and its flexibility means it often complements other forms of funding, whether traditional banking products or options such as invoice financing. It is also an ideal form of funding for printing businesses looking to expand.

“A key difference in using asset finance is that because the security will be wholly or largely in the asset being purchased, there is usually no need for additional security, which may be required for other forms of finance.”

The specialists

There are countless niche lenders and brokers in the marketplace as a google search will show. However, when it comes to those trusted by SMEs in the print industry, there are only a small number operating regularly in the sector.

Over the past three years, Compass Business Finance has sourced finance for its clients amounting to £100m. Director Mark Nelson says: “We provide a range of straightforward asset finance products. In order to ascertain which would be most suitable, we work closely with the customer to ensure that the product meets with their requirements. 

“A large proportion of the finance we provide will be for investment in new and used equipment that will either be an additional or replacement item for the customer. We also provide refinance and equity release products to the market, which allows customers to manage their cashflow requirements.

Ian Davies, head of UCF Print Finance, says: “Where we work well, is that we’ll visit a new or established customer, sit down with them for a couple of hours, understand their business and specific requirements then write up the deal and present it to the correct funder to explain why the investment works. 

“We do the presentation of the deal, which saves our client a whole lot of time and trouble.

“Generally, all the funding that we provide is fixed rate HP, and is arranged on the basis of a 10% deposit and a borrowing period of over five to six years with the asset as security. On refinance deals we would use the assets freely owned by the business to secure the loan.”

This being the internet age, there are of course plenty of options online, two of the more established and respected ones are Funding Circle and the Angel Investment Network.

Founded in 2010, Funding Circle (www.fundingcircle.com) is a peer-to-peer lending service, which allows savers or investors to lend money directly to SMEs. The loans funded so far amount to nearly £1.2bn. 15,000 British businesses are already borrowing, and 48,021 investors have lent funds to those businesses getting returns typically in the region of 7.4% a year. 

In the last couple of years, the Funding Circle has won both a Business Moneyfacts Award for 2013 (for Best alternative Funding Provider), and has scooped a Credit Today Award (Alternative Lender of the Year: Commercial). Furthermore, the government-backed British Business Bank is lending £40m through Funding Circle for investment to SMEs.

The Angel Investment Network (www.angelinvestmentnetwork.co.uk) is another example of an enlightened online lender. Sam Louis, company director, explains how it works: “We run a global investment platform, connecting investors to entrepreneurs. We have over 110,000 registered investors worldwide, and about half a million entrepreneurs, spanning around 60 countries.

“Owners of SMEs can create a proposal on our site, make it look great with branded logos and videos and use it to find interested investors to finance the company. People can structure their investment any way they want, there’s no exclusivity agreements or stipulations on how or when they raise the money.”

When it comes to what the lender will want from you, the requirements may not be as onerous as you might think. A business plan, for example, is not often a necessity. Compass’ Nelson says: “Our clients don’t normally need to have a business plan. But for larger investments and acquisitions it’s sometimes necessary. We would normally spend time with a client to fully understand the investment rationale. 

“This would involve evaluating the financial position of the company.  Then we’d draw up an appropriate detailed report for the underwriters.”

Davies of UCF agrees: “In my experience as a broker, business plans are rare for the type of fixed rate HP financing that we do, except for start-ups. Debt serviceability and cashflow are generally the main credit concerns for the lender.” 

HSBC’s Bearman says: “In my experience, business plans comes in all shapes and sizes. A business plan should not really be something that is provided for the bank. The client should have a plan that is working for its own benefit.”

Cost comparison

The sort of rates you’ll be paying will also vary depending upon the deal, and complexity of finance that a company needs. 

Davies explains: “There is no exact rate out there. Every funder has a different cost of funds and every deal will credit score differently and be priced accordingly.

“We are funding a couple of large presses at the moment and the flat rate is around 2%. We also have a couple of new starts that are priced around 6%. Obviously both deals are with different funders. 

“When we look at the credit and the asset, we look at which funder will do the best terms for the customer with the best available rate.”

Similarly, the terms and conditions you’re likely to come across can also be rather variable. 

Nelson offers the following rough rule of thumb: “The typical terms of a finance agreement is for the customer to pay a deposit on the purchase – this could be anything from 5% to 25% – and then fund the balance over a period usually between three and seven years. Generally, at the end of the agreement, full title passes to the customer.”

Davies makes a trenchant point: “Every deal we’ve done for the last three years has been fixed rate HP. Nobody really looks at variable rates anymore, as the general opinion has been rates can only go in one direction – up!”

There is a clearly a lot to think about and getting it right will be important. As Close Brothers’ Aust says: “It’s vital businesses understand what’s the best finance required for growth to ensure no commercial opportunities are missed.”

But it’s important to remember that there is no one-size-fits-all option. So if you are looking to boost your production firepower, now may be the time to take a look at what’s on offer. Start talking to lenders. Make some appointments and see what they say. After all, what have you got to lose? 

PRO TIPS AND PITFALLS

Getting started

Before taking the plunge, make sure you take a long, hard look at your business, assessing your growth and investment goals.

Do talk to your BPIF Regional Director, or the equivalent in your business body. They are there to help you. 

Be clear about the purpose you are raising this finance for.

Be realistic about the amount (and type) of finance you should raise. Your bank, specialist lender or broker will be able to advise you on this.

Check affordability, and prepare for times both good and difficult. By having, if possible, cash reserves, or assets that you can quickly borrow against.

Next steps

Once you have decided on the type of finance you might want to go for, shop around. Don’t get into bed with the first suitor that comes your way.

By the same token, do not necessarily just settle for the same broker or lender you have always done business with. 

Have a broad-brush business model or blueprint at the ready. Or at the very least good and orderly accounts. For your sake – and to impress your lenders, and give them the confidence that you and your company is worth lending to.

Ask yourself: “Can we predict the outcomes and benefits accurately enough to justify borrowing? Or would it be better to stay put and do nothing until we feel things are more settled?”.

Look at what other companies in your sector are doing – is it worth following suit or striking out on your own?

Once again, think carefully what will be the full impact on your resources if you go ahead, and take up the finance on offer.

Compile some testimonials from some of your happy customers and explain how your investment can create more.

Cash is still king. As the BPIF’s Marcus Clifford says: “In today’s environment of rapid change and variability, cash creation and cash management is the most critical issue relating to capital investment decisions. The amount of cash invested needs to be carefully balanced against the amount that will be returned.”

Try to identify when and how you will start to see payback.

The nitty gritty

The nature of today’s risk means that the future returns have a great variety of possible values and so time taken to evaluate this more fully is fundamental.

Internal rate of return (IRR) and discounted cashflow techniques take into account the time value of money and should form part of your decision-making process.

Factor post-investment analysis into the whole process. Make sure your expectations are being met across a wide range of criteria, such as customer satisfaction and customer value, as well as the financial investment criteria. 

Don’t overlook the possibility of arranging finance with the manufacturers. Heidelberg, for example, has for some time offered customers the opportunity to buy capital equipment and to repay the monthly finance costs with the purchase of consumables, in what’s known as an uplift model.

Do look into taking advantage of the government’s Regional Growth Fund (RGF). The stipulation of accessing the RGF is that the business must commit to safeguarding or creating employment.

According to Close Brothers “the size of the RGF grant available is based on the level of proposed investment, the size and location of the business, and finally the number of sustainable full-time posts being created or retained. For every one job created or retained, a grant of up to £10,000 is awarded – up to a maximum of 20% of the proposed investment.”

These days a good ethical policy can reap rewards both commercially and also in more intangible ways. And that can run all the way through to the type of finance a company procures. For company executives who place this type of investment at the top of their agenda, the UK Sustainable Investment and Finance Association provides details on its website of its members – the banks, finance houses, etc, who take ethical investing seriously – along with their specialities.

Once you are sure of your ground, and decide to go ahead, then be confident with your borrowing.

Keep trying. Raising investment is not a quick process and you might not be successful straight away. Be patient and perfect your pitch.

Borrowing trends

Read up. The BPIF’s most recent Printing Outlook Report, Quarterly Printing Industry Trends Survey Q1 2016, makes for, on the whole, heartening reading. Among its data/comments it states: “Printing companies have strong capital investment intentions for 2016”. And “access to finance has generally improved”.

Furthermore, an EU Investment Survey put together by Infotrends with the backing of the BPIF, says that with an average annual spend of €482,000 (£382,000), the hardware investment spend by printing businesses is sizeable. Considering the price tag of a high-end offset or digital press, however, the total level is moderate; it amounts to an average of €2,000 per employee. Top choices are digital colour printing equipment, followed by finishing and offset presses. More than half of all companies surveyed invested more than their long-time average in the past two years. Even more interestingly, the main reason to invest more was adding capacity or capabilities. More than half of the sites plan to increase their hardware investments in the next two years. The top reason for investment is to replace older devices, followed by adding capacity and investing into new capabilities.