Tag Archives: Base Rate

Weekly digest

Factoring Blog, 5th February 2016

JMS

Factoring Partners, weekly blog

blog

 

A quiet week in the world of Factoring Partners as a number of ongoing deals seemed to get stuck in the system, a combination of prospect indifference and diminishing financial requirements causing the slowdown.

The week was livened up by the remarkable news that the Bank of England Monetary Policy Committee decided to maintain Bank Base Rate at 0.5%. The only curiousity in this decision being that it was a unanimous vote whereas in previous monthly discussions there has been one dissenting voice advocating a rise in rates.

This unanimity would appear to remove any doubt or hope that there will be a rise in the near future. I’m no expert but that seems to position me well to comment on the absence of any likely rise compared to the ‘experts’ consistent in nothing else but their inability to correctly predict the timing of any rise in rates.

Elsewhere in the world as it affects small businesses in the UK, more evidence of abuse by large buyers over their suppliers, a continued weakness in equity markets brought about by, among other things, continually falling oil prices which in turn are not pro rata passed to petrol buyers.

A further cost will hit many SME’s on 1/4/16 as the new National Living Wage takes effect, giving workers in the UK over 25 years old a .50p increase. Its a good job there’s money in the system, from a variety of sources.

SME’s in the UK are often praised by politicians as being the life & soul of the economy yet continue to come under pressure whether it be from their customers who try to use them as a free credit line, or a complex and fragmented lending market full of options but with few independent sign posts along the way. Add a largely unhelpful banking sector into the mix and the lot of an SME is not a happy one!,

Weekly digest

The week completed, 9th October 2015

JMS

Back in March 2009 the Bank of England lowered Base Rate from 1% to 0.5%. I very much doubt too many economic commentators could honestly say they felt, at the time, Base Rate would still be 0.5% over six and a half years later.

Predictions that the rate would rise in early 2015, or shortly post election, have been proved wrong and no two economists would agree on when any rise is likely to happen. What is the general view though is that at some point rates will rise, in what increments and when is guesswork.

A contributory factor to financial success is a short memory and a lot of businesses will have been formed in the last six years with no ability to refer to a point in time when interest rates were materially higher than today. Consequently as and when rates do rise many businesses will need to undertake exercises to calculate their ability to service more expensive debt.

One by product of such a low Base Rate has been the increase in the number of non-bank lenders, driven by individuals and groups seeking a better return for their invested money. Consequently its possible an increase in rates could have a double effect, the number of lenders may go down, limiting choice and borrowing rates will go up.

One bit of good news this week from Tesco’s with a new promise to pay their smaller suppliers (those supplying less than £100,000 per annum) within 14 days.

 

……………………..and of course the weekly blog wouldnt be complete without a look at the puppies, only a couple of weeks to go before they head off to begin their careers within Guide Dogs

A video posted by @julian.straker on

Weekly digest

The week completed, 15th May 2015

JMS
Factoring Partners offer independent advice on invoice finance
Advice

The number of experts and advisers in financial services, and I presume in other sectors too, continues to amaze. Sadly some are so woefully inexperienced that their advice is not considered fully and I saw an example this week of a small business acting on advice given with dire financial consequences.

Advice is vitally important as is the source. Whatever the stage of a businesses life from planning a new one to growing an established one, to acquiring another one to restructuring an existing one, external advice can be the difference between success and failure. Advice given must be carefully considered, in context, and with due reference given to the source of opinions offered.

On receiving advice one must consider whether the adviser has any vested interest in the adoption of advice given and also consider the experience and independence of the individual offering any opinion and/or advice.

No advice is better than bad advice.

 

Another new arrival this week in the business finance world with yet another ‘unique’ offering. All funders bring increased competition giving borrowers an even wider choice and a business from 30 or so years ago, where choice was pretty much limited to the High St bank, would not recognise the current landscape.

Interesting meetings with the largest independent invoice financier in the UK who continue to demonstrate a real appetite for new business and have an array of funding products suited to most UK businesses. Without wishing to sound like a stuck record finance is available to businesses and with Bank of England Base rate still at 0.5% borrowing remains cheap, in relative terms.

 

Weekly digest

The week completed, 23rd January 2015

JMS
worried businessman
Slow Payers are driving me mad!

The weekly review starts with a bit of a rant! A number of instances seen this week of large businesses withholding payment to suppliers for no legitimate reason. This is a grubby, sharp practice many large businesses, including household names, seem to think acceptable business practice. It isn’t. If a business buys goods or services on terms then the buyer should adhere to those terms. A perfectly viable business can be ruined by its customer extending payment terms.

Some businesses, again including household names, appear to adopt an almost macho posturing attitude towards paying suppliers.  It is not always practical for a small supplier to take an ultra assertive approach with the customer leaving the supplier vulnerable to bullying tactics. Solutions to this problem are difficult and to a certain extent a cultural shift is needed.

 

Bank of England minutes show that all nine policy makers agreed on holding Base Rate at 0.5% revealing that the dissenters from earlier meetings who had voted for an increase now are happy to keep the rate set nearly 6 years.

The general view is that rates won’t rise before the May election and that any subsequent rise will be only a small increase, possible 0.25%.

Consequently funding for business remains very cheap and importantly, accessible. I have spoken with a couple of businesses this week complaining at the lack of funding. In both cases the proprietors have poor track records in repaying debt, not through a ‘can’t pay’ issue but a ‘won’t pay’attitude. It’s hardly surprising lenders will not rush to offer facilities.

A day, or large part of it, was lost trying to unravel the mysteries of search engine optimisation, any help gratefully appreciated!

Weekly digest

The week completed, 9th January 2015

JMS

A surprisingly busy week for the first week back after the Christmas & New Year break, whether this sets the tone for the year on not only time will tell.

A couple of interesting construction finance needs and a sizeable commercial property requirement added to by a business with a predominant export sales ledger. Further progress with a peer to peer requirement adds to a varied week demonstrating the capacity to offer far more than simply invoice finance. It also indicates the variation in finance available.

Of the enquiries currently being considered a High St bank is only involved with one.

Concerning news of an invoice financier taking a materially significant fee when a client banked a customer payment incorrectly. At a time when lending practices are being closely scrutinised, both commercial & personal, the scale of charge, in this instant, seems inappropriate.

The Bank of England has kept Base Rate at 0.5% and if this remains the rate in March it will have been at this level for 6 years. It would be interesting to hear if those who set the rate back in March 2009 would have anticipated it being at the same level 6 years on.

In looking at matters financial the excitement knew no limits on discovering that 1p, 2p, 5p, 10p, 20p and 50p coins make up a regal coat of arms!!

coat of arms coins

Weekly digest

The week completed, 12th December 2014

JMS

Christmas is most definitely here and businesses are deferring decisions to the New Year. This can be a little frustrating as funders are willing to offer and complete facilities and there is still plenty of time.

Two dreadful instances this week of large businesses deliberately extending payment terms to small suppliers seemingly with no legitimate reason. There’s no good time or reason for this practice and some large buyers seem to adopt an unacceptable almost macho stance in squeezing suppliers.

Without the permission of my client I clearly cannot name these well known businesses. Its a recurring and ongoing subject and sadly for SME’s I guess will continue.

I will be losing my bet, made this time last year, that Bank of England Base Rate would have risen from 0.5% by Christmas 2014. (Given the absence of any further MPC meetings this year Base Rate will end the year at 0.5%). Economically Base Rate needs to rise next year but this is unlikely before May. Although the Bank of England sets Base Rate free from political interference, I am a cynic!

The week has been punctuated by a couple of Christmas networking events with more next week too. Also next week will see a visit to a High Street to give the retailers a boost.

Interest rates

Interest rates on the rise?

JMS

INTEREST RATES

Bank of England Base rate was set at 0.5% in March 2009. With businesses usually paying interest at a margin above base rate arguably funding for business has never been cheaper. Recent noises from the committee that sets Base Rate suggest rises are on the way. These are likely to be in very small increments but businesses are still likely to see a rise in the cost of their borrowing.

Its prudent for businesses to budget using a variety of different base rates to enable the impact rises may have to be fully evaluated.

Bank base rate history is worth reviewing,………what impact would a base rate of 10% have.