The graphic arts and visual communications industry has been in a period of flux for a number of years now and with the outlook brightening, now is the time to invest in your business. As with the print industry, the commercial finance market has also seen wholesale changes over recent years.

New lenders are cropping up all the time, many of them offering new and innovative ways of borrowing money. Although this competition is great for business owners, it can become slightly confusing when choosing the right product for your business.

Finding the right financial products for your business is not just about finding the best rates, there are plenty of other factors to consider. Finding solutions that work in line with your cash flow is the real key. Funding should be there to help your business to grow, not to restrict cash flow.

In this detailed guide, we will break down the most suitable funding solutions for those in the print industry, along with their likely costs and some ideal uses for them.

Start-up loans

Start-up loans are, as the name suggests, is a business loan that is designed for the start-up, or growth of a new business. Most business loans are arranged using government or EU backed schemes.

The application process can be tricky and time-consuming, as the lender has no previous trading history available to make a lending decision. As such, the lender must rely on projected income and business plans, which need much deeper scrutiny than other forms of income verification.

Start-up loans are designed to be a fast and straightforward method of raising capital for new businesses, however, this is often not the case. The lack of trading history leads to very cautious lending decisions, with frequent reports of long and arduous application processes.

To give your application the best possible chance of success, the quality of the information sent to the lender is of vital importance. The lender will request a business plan, cash flow forecasts and budgets, and it is important that these are to a high quality, highly accurate and fully explainable in the event that the lender asks questions.

Lenders aim to complete these applications in two to three weeks, however you should be prepared to wait for as long as two to three months when applying to avoid disappointment. Successful applicants can expect to pay a fixed rate of interest, which is usually in the region of 6 percent per annum, with the loan usually offered for a term of one to five years.

These loans are only offered by a few select providers and can be a vital source of funding for new businesses. Using only a Government backed start-up loan to set up shop in the print industry may leave you slightly short of cash. This is because most loans are limited to just £25,000, which would not be enough on its own to purchase all of the equipment and stock needed to start a print business.

Unsecured business loans

Unsecured business loans are an excellent option for established businesses that need to raise capital quickly. Unsecured business loans can be used for almost any purpose, such as funding business growth, purchasing new equipment, or even just to inject working capital into your business.

Unlike start-up or personal loans, unsecured business loans can be offered for much larger amounts, with many lenders offering loans up to £500,000.

As the lender is not taking a charge over physical assets, the trading performance of your business and previous credit history become important factors. Although a loan may still be available if you have suffered credit problems, this will increase the lender's perceived risk, and as such, the interest rate charged.

Most unsecured business loan lenders will only lend to businesses with at least two years of trading history behind them, although there are options for younger businesses.

The lowest risk applications can enjoy very low business loan rates, with the lowest rates starting from 3 percent per annum. Loans are usually available for up to five years and applications can complete quickly, often in as little as five days to two weeks.

Revolving credit facilities

Revolving credit facilities are designed to provide working capital to your business to help you to manage cash flow. The most common type of revolving credit for businesses is the overdraft.

As the market continues to evolve, the overdraft is no longer the only option for those seeking revolving credit, lenders are now providing innovate funding lines for those seeking revolving credit.

Revolving credit facilities will usually have a pre-defined limit and the funds can be drawn down and repaid as many times as required.

Revolving credit is an excellent tool for those in the print business as the upfront cost of undertaking a new job can be high, with payment usually made on delayed payment terms. This can often lead to periods of tight cash flow, followed by an influx of income, only for the cycle to repeat.

Revolving credit can be used to fund these periods and have the advantage over business loans that you only pay interest on the funds when they are being used. Their facilities can usually be arranged very quickly, often in just a day or two and the facilities offered can range from £1,000 up to £250,000, or even £500,000 in some cases.
The rates on offer from various lenders can differ greatly, with facilities available from as low as 9 percent per annum, all the way up to 72 percent.

As there is such a vast difference between lenders, it is important that you get a few quotes, or compare quotes through a broker to ensure the terms offered are the best for your business.

Asset finance

Asset finance allows you to raise cash for your business and is commonly used for two main purposes—to purchase new assets or equipment or to raise cash from existing machinery or equipment.

As technology in the print industry improves, there is a need to upgrade presses and other equipment to remain as efficient as possible. Using asset finance to fund these purchases allows to you to protect your working capital.

Asset finance can be arranged using a number of products, ranging from loan style products to leasing options. Where leasing options are used, they can run for the life of the equipment and a direct cost comparison against a loan can be difficult to make.

Unlike unsecured finance, the asset finance provider will have security over the item purchased or refinanced. As such, the lender has a way of recouping their money in the event of default, making asset finance easier to secure than unsecured finance.

The application process is more detailed than the unsecured options mentioned above and although the approval rate is higher, applications take longer to complete. The average asset finance application will take an average of two to four weeks to complete.

Invoice finance

As the print industry usually suffers from prolonged payment terms, cash flow can be an issue for most businesses at some time or another. This problem is made worse during periods of growth, with the ability to purchase the supplies needed to carry out orders limited by delays in payment for completed work.

Invoice finance allows you to take up to 95 percent of the invoice on day one, rather than waiting the 30 to 90 day invoice period.

Invoice finance comes in three main forms, invoice factoring, confidential invoice discounting and selective invoice finance.

Invoice factoring works as above and transfers payment collection to your finance provider. This frees you up from credit control to focus on the business but does give up an element of control. In addition, your customers will know that you are using invoice finance, which may be undesirable to some business owners.

Confidential invoice discounting (CID) differs from factoring, as the credit control remains in-house. This means the customer will be unaware of the facility, but means more work for the business owner. Choosing between CID and factoring is often an issue of personal preference and the robustness of your existing credit control systems.
Invoice discounting and factoring facilities usually tie up all invoices, meaning everything has to go through the facility. There may also be a minimum contract term. Selective invoice finance allows you to fund each invoice on an ad-hoc basis, meaning you could fund some, or even just one invoice.

There is generally no ongoing commitment to continue to use selective invoice finance, but once agreed, you can usually fund further invoices quickly.

Commercial mortgages

People usually associate commercial mortgages with buying their business premises, but they can also be used to raise capital using a commercial remortgage. Commercial mortgages rates will depend on several factors, including credit history and the financial strength of the business.

Commercial mortgages will generally have the lowest rates of all products mentioned and can be taken out for terms of up to 20 years, meaning the monthly repayments will be the lowest. The rates offered start from 2.25 percent, with rates of 3 to 5 percent more common.

By extending borrowing over a longer term, the monthly cost of the money will be low, the interest will add up over the years and would usually lead to a higher total cost of borrowing.

Commercial mortgages for the print industry are available for up to 80 percent of the property value, and for acquisitions, up to 80 percent of the going concern value is possible.

As commercial mortgage applications require valuations and full, detailed underwriting, the average application will take six to eight weeks to complete.

For more information on all these options and to receive impartial advice please head to https://abcfinance.co.uk
ssss