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25 July 2017

How one digital media company used asset finance to grow


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How one digital media company used asset finance to grow

Digital media displays at Times Square, New York

By Tom Chirnside

Growing any kind of business requires significant investment. Businesses, no matter what industry they’re in, may need to acquire equipment, infrastructure, space, and of course, people. More often than not, these acquisitions need to occur before new revenues can start to flow in, putting a strain on resources.

To make it even more difficult, business owners and managers need to strike an even balance between expenditure and equipment to make sure that they can continue to operate, attract new business and manage their existing client base.

Digital media is more prevalent than ever. Companies are no longer investing as much in traditional billboards or newspaper adverts.

Thanks to new technology, information and advertising can now be viewed in a variety of ways including interactive digital adverts, augmented reality (AR), built in screens at railway stations, and now medical centres.

As part of our Intermediary business, Alleasing recently partnered with a broker to assist a growing digital media company that found itself wanting to grow but constrained by a lack of funds.

The company provides healthcare centres across Australia with HD screens which broadcast engaging and educational health and wellbeing content from a select number of health partners. These screens have the potential to reach large audiences with far greater impact than stuffy old flyers using dated graphics and photography.

Following a business acquisition, the company had experienced a great deal of growth and had also won a new client who required a large number of screens.

To be able to service their new client, and manage their everyday operations, they were in need of additional funds to pay for these screens but retain senior debt and equity for further growth. They needed a solution that would allow them to meet their clients’ needs, while ensuring they were properly managing their finances.

Alleasing and the broker worked with the company to review its requirements and financial situation. By doing this we were able to develop an opex solution that enabled them to acquire the assets they needed and ensure their business could continue growing in the future.

Things could have turned out quite differently if the managers had not considered alternative sources of finance.

Failing to secure funding to acquire new screens would have hampered the company’s growth and put pressure on management to raise more equity or re-negotiate their covenants, often a lengthy and stressful process.

Many businesses face very similar challenges, most commonly, accessing funds, to boost revenues and grow. Those that are unable to meet the challenge, stay stagnant or worse still, close down altogether.

Inadequate cash flow / high cash use, and poor strategic management have consistently been the top two causes of business failure over recent years, according to insolvency statistics from the Australian Securities and Investments Commission.

Although the number of Australian businesses closing down has begun to reduce, there were 1,817 businesses that went into external administration in the six months leading up to December 2016. Could this have all been avoided if operators had sought out alternative forms of finance?

Of course not all businesses would have been able to avoid closing down. There are a myriad of reasons why a company decides to close, but the fact of the matter is many businesses aren’t aware of the options available to them or have been turned down before and are now twice as shy to pursue alternatives.

Whether you work in health, manufacturing, agriculture or even energy, it doesn’t matter. If you have assets that need to be funded, no matter how unusual, come and speak to us, it may just help your business thrive, not just survive.

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