The printing industry has seen a lot of disruption over the past few years – from the arrival of 3D printing to the growing importance of managed print services, printing companies who keep up with the changes will capture a larger part of this $78.9 billion market. But keeping up involves change, and investments in new technology, which often require a capital investment.
Small shops and businesses characterize the printing industry, with the roughly 45,000 printing companies in the United States employing an average of seven to eight employees. While the industry has seen some challenges, including revenue declines during the pandemic, areas such as 3D printing show phenomenal growth.
A well-managed print shop that stays abreast of industry trends can still make money and grow. But to make money, you may need to borrow money. New equipment and web tools can ensure continued success. If it may be time for you to invest more in your print shop, read on to learn the top reasons that printing companies borrow and the best loans for your print shop.
There are many times when using borrowed capital is a wise business decision – even if your business has the capital to fund the purchase itself. For one, borrowing often supports business growth and expansion while preserving the success of your core business. Here are the top reasons that print shops choose to borrow:
Before taking out a loan you want to make sure it’s the right choice for your business. Lenders offer different loan products with varying rates and terms. Given how you intend to use the funds and other factors, one loan may be better than another.
Are you going to purchase a new, $2,100, pro-grade laminator? Or do you need to cover rent for a few months? Before borrowing, have a clear intent for the loan’s funds.
Knowing how you intend to use the money establishes several things – a budget for borrowing, how much you need to borrow, and where you should go to apply for a loan. Lenders fund loans in varying amounts, with traditional banks preferring larger loans. A bank is unlikely to extend a small loan of a few thousand dollars, but an alternative lender would work with you.
It’s important to know exactly how much you want to borrow so that you take out a loan that covers the full amount. Failing to take out a loan that’s large enough could delay expansion plans, or lead to having to borrow again to complete a project. Loan stacking or taking on multiple forms of debt can hurt your cash flows.
While determining how much you need to borrow, figure out how much you can afford to borrow. Successful borrowing is borrowing that you can afford. If a loan’s payment would strain your cash flows, consider scaling back your plans and borrowing less.
Make a budget and plug in an estimated loan payment. Consider how this loan will impact your business’ overall financial situation. If the loan is funding a growth opportunity, your existing cash flows will need to cover the payment until this new opportunity generates revenues
Traditional lenders rarely work with borrowers who have credit scores below 650. If you don’t have collateral to pledge, or aren’t taking out an equipment financing loan, they may require a score of 720 and above. For a small business owner, this could be a challenge.
Maybe you had to borrow heavily to open your printing shop, and this has hurt your credit score. Past financial mistakes, such as late payments or a default on a loan, could have dragged your score down. If you have a lower credit score, don’t waste your time applying at banks. An alternative lender is your best option for funding.
A pro-grade printer or cutting machine could cost $2,000 to $8,000 and up. Equipment wears out and needs replacing, or adding a machine could allow you to meet higher demand. Whatever the reason for purchasing new equipment, an equipment financing loan can help.
Equipment financing loans have lower interest rates than some of the other loan products available. This is because the equipment you’re purchasing with the loan serves as collateral. If you defaulted, the lender could seize the equipment. Since they have a lower risk of loss, they charge less for the loan.
These loans fund up to $150,000, up to $250,000 if you have a stronger credit profile. A newer print shop open less than one year can borrow up to $25,000, and with two years in business you can borrow up to $35,000.
Like it’s name implies, a fast business loan funds quickly. If you have an emergency, or a vendor is demanding payment and you don’t have the cash on hand, a fast business loan can bail you out. Alternative lenders can approve a fast business loan within hours, and fund within as little as a day.
Because these loans fund quickly, with minimal underwriting, lenders have higher risk. Higher interest rates of 9% to 45% compensate for this risk. But with a minimum credit score of 530, three months in business, and $10,000 of minimum monthly revenues, you could get the capital you need in a short timeframe.
The term working capital refers to the funds needed to keep your business running smoothly. It covers rent, payroll, and utilities – not fund uses for larger business purposes like a renovation, investment in equipment, or expansion. Failing to meet these obligations, however, could jeopardize operations.
Employees who aren’t paid on time will begin looking for work elsewhere, a landlord who gets late rent payments could be unwilling to renew your lease, and having your power shut off could shut down your business. Since paying these bills on time is important, if you’re having cash flow issues consider taking out a working capital loan.
These loans, designed to cover operating expenses, fund within days. They have a repayment term of one to three years, so you can use them to cover several months of rent or payroll. With a minimum credit score of 650 and two months in business, plus other qualifications, small business owners can get the funding they need to keep everything running smoothly.
Do you need to invest in the ink and other supplies to meet customer demand? Consider a small business loan for inventory. These loans help manage inventory, or invest in inventory management software.
With a small business loan for inventory you can take advantage of supplier discounts, buy products at auction, or buy the stock of a competitor closing their doors. If you have a minimum credit score of 530, three months in business, and $10,000 of minimum monthly revenues you can qualify.
If the majority of your customers pay by credit card, you could be a good candidate for a merchant cash advance (“MCA”). A merchant cash advance is an advance against future credit card sales.
To qualify for a MCA the lender analyzes your past few months credit card statements. They use this analysis to predict future sales and advance you a sum based on that prediction. Lenders take their repayment as a percentage of these swipes, making them easy to repay.
Because it’s a revenue based loan, your credit score is less important. Small business owners with lower credit scores can qualify.
The best business loan for your printing shop gives you access to the capital needed to reach business goals. It has repayment terms that work with your business’ cash flows, and flexibility to keep operating normally. Shield Funding offers a variety of small business loans to help your printing company succeed. Reach out today to find out more.
