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Access to Capital: A Defining Moment

October 26, 2008 This economic downturn will set the stage for a parting of the ways for those printing firms who will make it, and those who will merge or disappear. While the presentation of industry ratios shows technology investment as the leverage point between profit leaders and laggards, what we are really seeing is that access to capital will quickly separate the wheat from the chaff. (The cycle will clock around every time payroll approachs and the line of credit limits and loan covenants kick in.)
At Executive Outlook, the pre-show conference which is the opening bell for Graph Expo, a thumbnail sketch of lending sources at the show was presented: RCA Capital (Booth 3641), Corporate Finance Associates (Booth 3989) Equipment Finance Corp. (Booth 973) Great Atlantic Capital (Booth 3736) International Financial Services (4225) and People’s Capital and Leasing (Booth 1369).  
Jim Dunn, president of Heidelberg USA, says customers of his company use several of these and other sources to fund equipment buys. But the the problem, he noted, is not availability of capital. It's that the cost of capital is at rates that are currently unfavorable. And the other factor limiting lending is the ability of borrowers to qualify for loans. 
As any business knows, lenders charge more if they think the borrower is more risky. And the balance sheets of those who have been lagging on investment do not look good. If operating printing equipment is fully depreciated and has very little street value, it will not contribute to a favorable financial portrait.
We had a chance to quizz four Komori customers yesterday--Anstadt Printing, Jones Packaging, Solo Printing, and 4Over--that are in the process of varying degrees of capital invesment right here at Graph Expo. All said that for their firms, obtaining loans has presented no problem. Jones Packaging has on order a customized Lithrone 40 inch packaging press; Solo Printing just added a System 38S web and Fuji Taskero workflow system; Anstadt added an LSX 629; and 4Over announced a massive expansion with new plants in Florida, New Jersey, Texas and creation of a new HP-powered GrandFormat.com wide format division. All said access to capital was not an issue.
As Manny Hernandez, president of Solo Printing noted to me, this economic downturn will make for a shakeout that eliminates marginal players in the printing indsutry. "Those who survive will be highly profitable," Hernandez said. May you be among them.
 

Posted by Bill Esler on October 26, 2008 | Comments (0)