provided by: 
Printing businesses today are confronted with opportunities to improve and expand their business operations. Many of these opportunities include the purchase of other businesses, new equipment, divisions or product lines.
New opportunities permit them to market new products or services to both existing and future clients. It requires capital, for the most part, to enter into these purchases.
Of course, a printing business may always use its own capital to fund improvements, but this approach may not be the most advantageous and may deplete resources. This article will focus on a company's options for raising money, as well as some of the requirements for financing.
Get Your House In Order
Like any new venture, you must have your ducks in a row before seeking new capital. Simply stated, businesses are expected to have some idea as to how they will use the money raised.
Before asking for capital, first adopt a business plan that contains the well-thought-out operational goals, and future business projections.
The business plan should estimate revenue and expenses for its current and future business lines, but be believable. These projections may include reasonable expectations based upon the purchase of the new business, machinery, or product lines, but should also detail accurate expenses because underestimating expenses, may cause businesses to find themselves in hot water really fast.
Further, outside credit providers may require a printing company to detail its future plans, and a business plan usually accommodates this request.
Additionally, a business must ensure that its accounting/financial system is in proper order before seeking outside capital. There is no requirement—unless it is a public company—that a business audit its financial statements, however, one may provide comfort to a credit provider.
The firm must review its financial information for accuracy prior to any application for credit. If you do not, the credit provider will.
If the credit source finds inaccuracies or misstatements, there will be problems. There is simply no way to disguise warts, and, if the company attempts such a course of action and is discovered, it may have difficulty obtaining current credit, as well as future financing.
The business must also consider making its own investment in the company before raising capital. It does not necessarily have to make a monetary investment, but should consider a variety of steps to please would-be credit providers. Such an investment is hard to quantify, but credit providers are looking to see if the company and/or owners have assumed some of the risk in the new venture.
Credit providers appreciate that fact, because the risk is spread over many players, and is not solely on them. This is not to suggest that a personal guarantee must be provided, but businesses and/or their owners must feel the pain, as well. Feeling this pain may include reduced salaries, dividends, or significant reductions in expenses.
These suggestions should be considered a starting point prior to seeking credit from outside sources.
Sources for Credit
Much of this article is dedicated to outside sources for credit, but you should consider inside sources, such as personal loans and investments from company resources and/or ownership, as well. These may not be your first choice, but at least, you know who holds your debt.
How To Raise Capital
However, if the business is unable to or chooses not to self-finance, there are four particular capital raising areas to explore, including commercial bank or credit agency loans, letters of credit, public or private securities offerings to investors, and stock purchases.
The most common way of financing a printing business is through a commercial bank or credit agency loan. Most credit providers require lengthy applications and financials statements. Businesses must execute these documents with great care, because if there are inaccuracies or misrepresentations, there may be grave consequences.
Similarly, printing companies will sometimes obtain letters of credit. These are similar to bank loans, except provide a source of credit on an ongoing basis. That is, the business will withdraw funds based upon the letter of credit.
The business may obtain a letter of credit from a bank or financing agency based upon its financial history and application. This may be a short-term solution, however, and does not necessarily provide long-term financing.
Many printing businesses also consider raising money through either a public or private securities offering. Businesses will offer to sell their stock or bonds to the public for funds. Both offerings must be done in conjunction with legal counsel, because the rules and regulations relating to these types of offerings are complex.
Some of these offerings may require the company, as part of an ongoing basis, to provide information to the public, as well as to seek legal opinions to satisfy reporting requirements with both the United States Securities and Exchange Commission (SEC) and individual states. This causes the price of capital to rise.
Some printing firms may also offer to sell their securities to a seller of a business line or company. The stocks or bonds would be issued to the seller, and, in return, the seller would transfer its ownership interest in the company, product line, or equipment to the purchasing printing company. Such an offering is similar to a public or private offering for money in exchange for securities, and there are numerous requirements.
Printing firms must have their house in order before raising credit for improvements. The business must then satisfy itself that the credit arrangement will be suitable and not break the bank.
Ernest E. Badway is a partner with the New York and Newark, N.J., law firm of Saiber Schlesinger Satz & Goldstein LLC, practicing business law where he advises and counsels printing clients on corporate, business, litigation, employment, and many other matters. Contact him at eeb@saiber.com, (212) 461-2323, or (973) 622-3333.
author: By Ernest Badway