06Feb2013

Financing your print finishing equipment

Why Lease Finance Is Never Cheap

With so many sign and print shops reliant on cash flow just to keep their business alive, the decision to look at leasing and rental agreements for your print finishing equipment is simple and easy option as spreading the cost of using your  finishing equipment, for example, over 3 to 5 years, is a viable alternative especially if the recession is still biting at your heels or perhaps you are a new business with far too many capital purchases to consider.

Upgrading your Folders, Wide-Format Printers, Roll laminators

To improve print quality and the cost per print, it might be time to update your wide format printer  to a model from Mimaki, Epson or Roland. Purchasing a wide format printer where the average printer costs €15,000 might be a strain too far for your projected business cash flow. Many printers are opting for a lease finance arrangement directly with the company supplying the print finishing equipment. Now this is where the hidden costs of easily arranged finance really start to appear!

Cheap and easy finance for your print finishing equipment? Don’t be fooled!

Ok you may have tried the banks and although banks may be prepared to finance leasing and rental agreements print finishing equipment, those same banks may decline your request to advance a loan to cover the capital cost of outright purchase, because they know that if you purchase the items and fail to meet your loan repayments, they cannot automatically claw back the equipment from your business. So, by default you have some extra time to improve cash flow before the banks come knocking!!

However, if you fall behind with your leasing or rental agreements with company who sold you both the machine and the finance , you’ll have to find another way to organise your print finishing because the owner of the equipment will do one of three things:

1. Visit your premisses directly to recover their equipment
2. Cut your credit line on supplies and consumables
3. Issue legal proceedings with unreasonable haste….you are after all just another number in their system

What to watch out for when buying finishing equipment  leasing equipment 

1. It’s simple when you buy equipment outright. You own it and are responsible for the maintenance and if it goes wrong within the guarantee period, you know who to tackle the sort out the problem. If you lease with finance direct from the supplier of your equipment, watch out for the add cost of the service agreement which is built into the lease. the cost could be up to 25% higher!
2. If you choose leasing of the equipment for your financial advantage, you need to understand all of the contract terms, including all of the small print. It is better if you can take a quick course in basic leasing terminology.Instead of just being an expert in your own line of business, you have to determine, if you have the option, whether you would be better off leasing the asset or purchasing outright. Always try the banks first or get finance from friend
3. It is essential that you find out who will own the equipment at the end of the lease. Be very careful, as very often there is a “small-sum” to transfer ownership and sometimes this is not an insignificant amount! Furthermore, there may not be an option to buy and you may be rolled into a new lease automatically. CHECK THE SMALL PRINT…ask the questions!
4. It is vital that you know what happens to the equipment and your finances if you wish to terminate the agreement early or replace the equipment for more up-to-date technology.
5. There is no sense in leasing equipment over a longer term than you would prefer, just to keep the monthly repayments down, if it leaves you with equipment that is out of date, technology wise, and disadvantages you against your competition. Also quick finance is never cheap finance…run the costs!

Leasing and renting equipment are essentially the same. Rentals tend to be for short periods whereas leases are for a longer term. Unless you know the difference between true leases, financial leases and sale and leaseback versions, you may be walking through a minefield. Your accountant will help you compare the total cost of leasing or agreeing rental agreements for the equipment and to decide the tax advantages and disadvantages of ensuring that your company has the right equipment, at the right time, so that your business can operate properly.

A final sting in the tail; where you find it very easy to receive offers for lease or rental finance, the rates may be so high that it can quickly cripple your business. Always be prepared to shop around for the best deal.

Finally, don’t forget us for your Printing and Finishing Solutions, we may not supply the finance but we can help advise on the best sources and solutions for all your laminating, printing and finishing needs. You are not just another account number with us!

We do:

Wide format Laminators

Wide format printers

Roll laminators and films

Visit us at www.dbcgroup.ie