In August 2008, credit markets began to tighten. By December 2008, credit was hard to obtain and interest rates had begun to increase in line with supply and demand. By February 2009, sheer panic had consumed our credit markets. The fear that consumed lenders brought in a simple rule – if in doubt say no. So as we travel on the road to recovery, what is legacy of the GFC for the credit markets?

Traditionally print as a communication medium had fared reasonably well in downturns. Higher-cost advertising such as TV and radio had usually been harder hit. This time around as well, printing businesses largely survived when compared to the fall out from the 1990 recession or the speed bump of 2000. 

While credit availability didn’t disappear altogether, the securities and covenants being sought by lenders made it difficult. Some of the lessons we should have learned include:

• Equipment suppliers are not that clever at financing – there have been numerous embarrassing failures.

• Companies that took delivery in 2008 with the intention to pay in 2009 saw the GFC intervene with plans and found finance unobtainable or the pledging of securities inequitable.

If the only way a printer can get finance is through vendor finance, maybe we should be questioning the financially viability of the investment. 

If, say, four commercial lenders decline a credit request, we ought to ask the question: is this a good investment decision? I can cite a few examples where the answer has been yes, however, the majority of the time the answer to this question would be no.

So where to from here? Credit seems to be more transparent and logical in 2010 than it was a year ago. It is getting better, albeit slowly. Requests for credit are still a bit of hit and miss, however, our judgement is now being rewarded with a greater level of finance approvals. But the printing industry still has an abundance of capacity and until that capacity is utilised, future investment in larger machinery will remain low.

I think most printers have been concentrating on managing the day-to-day side of their businesses and controlling that rather than embarking on an investment platform. In some instances, this has created a strong position for them going forward as a lot of costs have been controlled, practices improved and clear efficiencies created.  

How will the future be financed? Vendor finance is a bit of a mixed bag. Many of the digital vendors have true vendor finance. Some others simply rebadge banks’ money with their own name, so credit has been assessed by the banks anyway. One of the problems I see with vendor finance is that it enables the vendor to really sink its hooks into you – you never really know the payout amount or refinance amount and that can snowball out of control. 

A number of vendors that have taken a caning with failed companies over the last couple of years so I’m not sure what their appetite is now. Careful I suspect. 

A recent setback is the failure of numerous businesses in the past four to eight weeks. Every major bank and financier has been scarred by a failure. Their appetite dries up. Still we push on – finance is alive and is now more obtainable than it was 18 months ago.

Wade Oldham is the director of Wade Oldham Finance.

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