Case Study – Printing Company

This printing company had sales of £1.8 million and it is based in the East Midlands. The company was encountering financial difficulties predominantly because it lost two significant customers in the previous six months before contacting CFO.

This in turn to the loss of a respected senior sales manager and the removal of the sales personnel. Turnover has now dropped to £1.3 million but the company directors believed that recovery was possible and so, recruited new sales people. Under pressure from HMRC to pay an outstanding VAT quarter of £38,000 it agreed a time to pay deal with HMRC over three months. This was not affordable.

The bank provided a small overdraft facility of £50,000 and a leasing company, also owned by the bank, had provided £300,000 worth of asset based lending against the printing presses. the working capital was inadequate for the company and they began looking for appropriate funding.

They approached our midlands regional manager and asked for advice. We introduced a new factoring company to the business which provided a facility against the debtor book of £330,000. This paid back the bank overdraft, paid off the VAT liability and provided additional working capital headroom for the business. The factoring facility is a flexible product which allows the company to issue customers invoices and then borrow money against those invoices at the rate of 75% of the total value of those invoices.

When the customers pay the company the balance of 25% (less any charges and interest) is paid over to the company. The directors did not like the concept of factoring initially! They claimed to have heard bad things about this type of product. All of which were incorrect. The funding provider is supportive of the business and has provided a working capital facility that can grow with the company.

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