Financing new kit - Where's the money? - Andy McCourt's ReVerb

There probably has never been a better time for the Australian and New Zealand printing, packaging and allied industries to re-equip. There probably has never been a greater imperative to do so either. Interest rates are low, print runs are getting shorter but more frequent, digital technology is getting better and better, demand is again rising in many sectors and, to quote Mr Abbott’s election edict: “Australia is open for business.”

Someone should remind the banks about all of the above. From recent projects I have worked on to gain finance for well-researched, properly costed and profitably business-planned technology investment, it seems the banks and other lenders have placed anything to do with printing on the ‘naughty step’ and are reluctant to finance new equipment.

I’m not a bank-basher and anyone who was not in a coma during 2012-13 will acknowledge that the sizeable failures in our industry during this time would cause a red light to be flashing somewhere at lending central; screaming ‘caution, red alert!’ whenever an application for financing a piece of printing kit floated across the desk. However, have the banks fully appreciated the post-GFC recovery; the speed at which print has rebounded and the juicy opportunities that conversion to digital offers? Are their analysts even probing the latest industry trends at SME level and advising of opportunities to lend?

Like ‘sins of the fathers,’ it seems printers who survived or even prospered after the GFC and private-equity led madness, are being punished for the mistakes of others. What makes it even more frustrating is that most of the finance sought is for sub-$2 million capex – often sub $1 million – in digital technology and not $3, 4, 5 or 6 million for a lumbering great hunk of heavy metal. No offence to the major press makers but it’s horses-for-courses; the big iron sales will be fewer in number than smaller, nifty digital units as markets fragment further.

Recent projects I have worked on involve presenting business cases for financing much-needed digital printing equipment, at the higher end of digital. Without names or pack-drill; it’s tougher than tough. It’s almost like the hoary old chestnut: “to get a loan from a bank, you need to prove that you don’t need one.” Perhaps glamming-up the pitch like a chestnutty old ‘hoar’ would get better results?

Consider this: you have a successful print business and have consistently delivered profits for 15 years. Almost all of your equipment is analogue but you have still managed to do the short runs by efficient plate making, short make-readies, automation and great staff. But runs have gotten even shorter and now, customers want variable content:- you need a digital press and not a toy one.

You trot off to the same bank that happily financed the analogue kit and always received payment on time but, instead of just asking for a look at the books and a bit of security, they now require a detailed justification, business plan and all manner of minimizing risk and still the answer is ‘no.’

No matter that the sector you are targeting is experiencing double-digit CAGRs and all renowned research organizations back this up. No matter that you identify the opportunities with convincing data – ‘it’s printing innit?’ – and that’s super risky, and well on the nose.

This myopic view by sectors of the finance community needs to be challenged, overturned and debunked. The CEO of the Australian Bankers Association, Steven Münchenberg, has written (quoting a senior banking executive) that banking is: “the oil that keeps the economy ticking over.” While not denying the overall excellence of our banking system compared to the disasters of Europe and America; it seems the oil filter might be a tad blocked and in need of a change. Perhaps it’s a timing issue; a stall of the engine as the economic accelerator is depressed once again – but the oil of equipment finance is not sluicing around the gears of the digital printing industry right now.

No sooner than Kevin Rudd’s tears had dried after last September’s election defeat, the Coalition announced the FSI – Financial System Inquiry. In response, the ABA’s CEO Mr Münchenberg, commented: “We must ensure that we have a banking system that continues to meet the needs of household and business customers, shareholders, employees and the broader community. Meeting the needs of customers, including families and small businesses, must be central.”

Fair enough, good words but are the needs of small business as applied to print and graphics businesses ‘central?’ The misconception that ‘print is on the way out’ when in Australia alone it is a $6.5 billion industry with around 45,000 direct employees and over 100,000 indirect; is palpable. Print is just as embedded in the IT revolution as is the iPhone.

In the recently announced Priorities in Print funding via the PIAA, access to finance is identified as a cornerstone issue. This is welcome news but may take a while to filter through.

In the meantime, banks and lenders would do well to closely examine the excellent opportunities for financing the right kind of digital capital equipment, to worthy businesses, that exist right now, are well researched and can be convincingly articulated – if only you would open the doors a notch.