Printer Sues After Financing Is Pulled –MichelsonMarch 2012
David Moyal has felt the fallout, first-hand, of just how difficult it's been for printing companies to secure financing for their businesses. But, in his case, Moyal thought he had a loan in place, only to find his bank reneging on its commitment in 2007 to provide nearly $4 million to finance a planned press purchase. The president of Color-Web, a unit of 1800Postcards.com, contends the funding was pulled, not because his metro New York City-based printing operation was struggling, but more so due to the fact that the Great Recession crippled many printing concerns, making graphic arts industry loans overall a riskier investment.
As part of a counter-suit filed by Color-Web—in response to the bank filing an initial lawsuit last year to recover a $200,000 deposit it did pay out—the general commercial printing and mailing business (with a core specialty in postcards) is seeking $13.8 million, alleging fraud and breach of contract. “We arrived at the amount of our claim by estimating what four years of saving on production costs would have totaled, had we been able to use the new technology to grow our business and compete in our highly competitive industry,” explains Moyal. “When a bank does something that impedes commerce and destroys the value that a business has earned over many years, its role in the marketplace becomes extremely damaging.”
Color-Web claims that the strategic business changes it made, based on the assumption it was installing the new press, were not quickly reversible, exacting a heavy toll on the company. Operating a 125,000-square-foot digital and offset printing facility in Manhattan, and a second web offset printing plant in northern New Jersey for runs of 500,000 or more, Color-Web reports it consequently had to lay off nearly 100 workers and is even exploring closing up.
“This lawsuit is not just about Color-Web’s claim against a bank,” notes Moyal. “If our bank is allowed to renege on a commitment to us, then any business’ bank will be able to renege on a commitment to them. Banks, as licensed institutions, should be held to a higher standard, and a signed commitment should be followed through on. 1800Postcards.com signed its first notes (with the same lender) in 2003—and we honored those commitments, in spite of the economic downturn that ensued.”
Of course, the bank has an opposing argument why the loan fell through, so it will ultimately be up to the courts to decide. Even so, the saga does illustrate how hard, but critical, it is to get the financing to optimize productivity. Because, as the CEO of another print shop stressed in an article this issue about why they installed a color inkjet web press in January, “If you aren’t growing, you’re dying.”