Tag Archives: factoring blog

Weekly digest

Factoring Blog, 4th March 2016

JMS

Factoring Partners – Weekly Blog, Friday 4th March 2016

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Factoring Partners is not a volume introducer of business to the invoice finance world. A quick hunt around google will confirm we have only a limited presence on the web so with this source bringing very little it’s surprising in a way to have a week like this one where enquiries are at a level not seen for some time.

I wish I knew why this was the case, presumably the product of groundwork done some time ago or pure luck – or somewhere between the two and its also inappropriate to welcome this increase as indicative of an overall improvement in likely invoice finance usage.

A couple of recruitment businesses, an importer & distributor of menswear and an engineering business have all been  assisted this week. Sadly only one of the businesses is completely new to invoice finance (being given its marching orders by its bank) the others being existing users.

Many businesses will view their funders as providers of a commodity (whereas in times gone by the facility was often relationship driven) so are not afraid to move, sometimes frequently, from one funder to another. There can be a significant material gain in switching either through an increased funding line or a superior service so businesses should not be put off switching but the motivation needs to be a plausible one.

This week, within the invoice finance market, comes news of yet another new entrant to the market, to be started by highly experienced individuals. Whether the market has room for more entrants is open to doubt but with the banks continuing to fail to serve their small business customers I guess the need for an independent sector remains strong.

Away from the excitement of the invoice finance world, news is dominated by the great EU debate and the unedifying spectacle of politicians grabbing their little  bit of attention. I’m not sure why we should take any notice of politicians one way or another. They have consistently failed to negotiate a position with which we are comfortable within Europe and I suspect would be similarly hopeless at trying to navigate an exit.

 

 

Weekly digest

Factoring Blog, 26th February 2016

JMS

Factoring Partners Blog, 26th February 2016

Choices for Business, but are they all good?
Choices for Business, but are they all good?

After a weeks break the office re-opened to a couple of good invoice finance enquiries over which a number of funders are fighting and a satisfactory outcome, at least for the prospective client, is assured.

Many businesses looking for finance will use the web as a starting point for their search. In previous years a Bank Manager may have been the person to whom a Director may have turned but that seems, for many reasons, no longer the case.

The web is an astonishing tool and any business using the search term ‘Factoring’ will be met by a staggering array of possible pages to visit.

Some query answers are disingenuous with the page simply being an automated enquiry distributor bringing no benefit whatsoever to the searcher. The consequence for the searcher is that their details are circulated to a number of different funders with the resultant sales calls. As little or no thought is applied to this process the Director of the searching business may find him or herself wasting a great deal of time.

Businesses need quality, independent advice and the web does not help in this but simply offers information through which the Director has to wade. Those sites claiming to be brokers are all too often fronts for either lead generation services or insolvency/accountancy practices with a whole different set of motivations.

Factoring Partners can boast many years experience, a whole market view and independence from any third party. We also tend to get results!

Away from work the news is ruled at the moment by our involvement, or otherwise, within Europe. My own view is that we should stay within Europe and this will be expanded upon in another blog! Lucky readers!

 

Weekly digest

Factoring Blog, 12th February 2016

JMS

Factoring Partners Blog

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An article on the BBC website this week quotes former City regulator Lord Turner making a couple of interesting statements, one about interest rates, the other about peer to peer lending.

Whilst at first sight the two may seem only distantly connected the link is in fact a close one.

Lord Turner told the BBC that “interest rates in the UK may not go up beyond 2% by 2020″. On the basis that Base Rate has been at 0.5% since March 2009, a rise to 2% within the next 3 years would represent a sizeable increase, but, in my view an inadequate one.

With rates so low comes a desire for savers to put their money to work and much funding has been put into the peer to peer network via an ever growing array of funders offering facilities to both individuals and businesses.

I cant comment on peer to peer finance as it affects consumers but within the SME finance market there are plenty of such funders. The comment made by Lord Turner is “The losses which will emerge from peer-to-peer lending over the next five to 10 years will make the bankers look like lending geniuses,”

This comment has, not surprisingly,  upset the P2P lenders who are quick to point out their robust credit policies and track record so far.

I havent seen enough P2P facilities in action to make representative conclusions. One or two I have seen would make traditional bank managers wince whilst others have been written on the basis of a seemingly sound credit. However the views of a former city regulator need to be considered. Only time will tell the accuracy of his predictions.

In the meantime those putting their own money into any type of peer to peer lending should think many times before investing, and then think again.

Weekly digest

Factoring Blog, 29th January 2106

JMS

Think Invoice Finance is expensive – Read On

Costs & Benefits of Invoice Finance
Costs & Benefits of Invoice Finance

There’s a widely held perception that invoice finance is an expensive funding tool. Starting with the premise that any business incurs costs whatever stage in its existence,  then its important to be able to measure and compare costs.

I have spoken at length this week to a business about to embark on a new invoice finance facility. The business has turnover in the region of £4m and is an importer & manufacturer of product sold into an established and predominantly creditworthy UK debtor base. The new invoice financier has offered an 80% facility subject to a funding cap of £800,000 with funds used attracting interest at a rate of 2.5% above Bank of England Base Rate (Currently 0.5%).

There’s an administration charge of £8000 a year.

The funding line provides sufficient funds to replace existing facilities (average funds used are around £600,000) and allows for planned expansion.

In days gone by the funding charge may well have been the same at 2.5% above Base Rate, although of course Base Rate has been significantly higher. The administration charge would have been materially higher.

The facility on offer represents a cost effective means of maintaining and growing a business. The facility is supported by relationship ‘banking style’ and the expected electronic support.

In this case I believe the business has as good a facility at as good a rate, as possible to achieve. Alternatives considered including equity investment are not comparable.

Not all invoice finance facilities are as easy to justify cost wise and rates and charges will reflect risks involved but invoice finance should never be written off without full consideration and of course proper comparison.

A good, experienced, independent broker will of course be able to help any business search for the most cost effective and viable funding solution.

Weekly digest

Factoring Blog, 22nd January 2016

JMS

News from the High Street

Retail

Two items of company news in the last few days ought to come to the attention of SME’s and flag aspects of their own trading and funding.

Firstly, the shoe retailer, Brantano, went into administration yesterday (21st January 2016) with the Administrators now seeking a buyer. With 140 stores and 60 concessions there are now around 2000 jobs at risk, all within a business bought less than 6 months ago by a Private Equity business.

Private Equity businesses work very much to their own agenda and the welfare of the 2000 employees will be a long way from the top of their list of priorities. Notwithstanding the role of Private Equity businesses Brantano had a place on the High St and almost by default many suppliers would have viewed them as a satisfactory credit risk.

It highlights the risks as mentioned in last weeks blog with businesses not covering their customers for non payment/default and taking a potentially business fatal hit in the event the customer goes bust. There’s no merit or return assuming a customer is a sound risk, merely because they occupy many HighSt placements.

Another item of news of interest and consequence to SME’s is the letter sent by Holland & Barrett to suppliers expecting them to pay, effectively, for the privilege of supplying, by reducing their charges.

Large businesses have done this in the past and continue so to do, utilising their size and status (a euphamism if ever there was one) to force suppliers to cut margins. The tactic, whether by extending terms or forcing discounts is fundamentally wrong and the large businesses that undertake these sharp practices are ultimately damaging their own supply chain.

Weekly digest
Factoring Partners Blog
JMS

Factoring Partners, weekly blog, 15th January 2016

no credit insurance
No Credit Insurance?

Credit Insurance

A large part of this week has been spent on credit insurance matters, both speaking about it to a number of prospective users and a day in the company of Euler Hermes, ‘the UK and world’s leading credit insurer’

To many businesses the amounts they are owed by their customers represents their biggest asset and it is surprising how many don’t bother to take any kind of insurance to protect themselves against customer non-payment.

I have been speaking to a local business that suffered a £50k bad debt in 2015 and with no credit insurance policy in place the damage inflicted on the business by the unexpected default was very nearly, but not quite, terminal. Luckily the business had historic reserves enabling the loss to be absorbed but not all businesses would have coped and may well have gone bust themselves.

Euler Hermes have a policy called ‘simplicity’ aimed specifically at businesses with annual sales of less than £4m. Dependant upon the actual turnover there’s a fixed, non-negotiable, premium.

For example for a business with turnover between £80k & £400k the premium is £3670; rising in tiers with businesses between £3.2m & £4m paying a premium of £11740

The business referred to above has now taken out a policy and whilst there’s an element of closing the stable door after the horse has bolted as far as last years loss is concerned I think a prudent decision has been taken. The business will also benefit from accessing the Insurers proprietary information providing sales and management intelligence and this is a feature not to be undervalued.

Regardless of customer base credit insurance is something to be given careful consideration, assuming customers are immune from insolvency is dangerous and a quick look back over time will reveal seemingly solid businesses that have failed.

Back to the world of invoice finance and yet another single invoice financier about to join the market!

 

 

Weekly digest

Factoring Partners Blog, 7th January 2016

JMS

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FACTORING PARTNERS………..WEEKLY BLOG

 

2016, globally, doesnt seem to have got off to the best of starts. The news remains filled with either natural or man made disasters and financial markets appear to be in freefall.

The nature of our existence tends to be a parochial one so there’s an understandable tendency to concentrate on issues as  they directly affect, rightly or wrongly, prioritising them over the global picture.

Consequently the invoice finance world begins 2016 in an optimistic way and Factoring Partners has seen a couple of small enquiries unexpectedly arrive at satisfactory conclusions already.

Business confidence, anecdotally, seems reasonable and this view is reinforced locally in Coventry & Warwickshire with a recent survey by the Chamber of Commerce with respondants saying they are more confident this year than any previous year in the last 10.

Being a little cynical I wouldnt take a lot of notice of this kind of survey as most people tend to begin a new year in a relatively optimistic frame of mind and it represents the chance for a local newspaper (and blogger) to fill a bit of otherwise empty space, but nevertheless its encouraging!

Its clearly far to early to say the first week of 2016 is in anyway representative so I’m left with an item on my own work related wish list for the year ahead, ignoring the obvious.

LinkedIn,  has its use in tracking the frequent moves of invoice finance employees but I’d like an end to the seeming endless supply of trite and tedious business (and general) sayings some people seem to enjoy posting. It wont happen of course and someone, soon, will post some absurdity like the longest journey beginning with a single step.

Weekly digest

Weekly Factoring Blog, 18/12/15

JMS

Factoring Partners

Happy Christmas from Factoring Partners
Happy Christmas from Factoring Partners

 

This week the Asset Based Finance Association (ABFA) released their statistics for the quarter ended 30/9/15. ABFA members, of which there are over 50 , include all the bank owned invoice financiers and almost all independent providers and between them they write the vast majority of invoice finance business.

These statistics, like any, can be read in different ways. One number that is always worth looking for is the number of businesses in the UK using ABFA member facilities and as at 30/9/15 this was 44,148.

There’s not been  a lot of growth here recently but drilling down further its apparent that clients who have annual sales between £0 & £5m see their numbers fall.

As at 30/9/15 35,433 client with turnover within the above parameters used ABFA member facilities. As at 30/9/14 this figure was 35,653.

Going back to the end of 2012 the figure was 36,038.

This is not an encouraging trend! Businesses in that turnover band are crucially important and I’m not really sure what these results reveal. Aside from a growing number of funders operating in that sector, such as the internet platforms, and certain single invoice financiers, a whole mix of reasons contribute, not the least of which is continued failings to get the message across properly.

With business funding readily available from conventional and unconventional sources 2016 may prove challenging for conventional invoice financiers.

That’s it for 2015………lets hope for a  peaceful & prosperous 2016.

Weekly digest

Weekly Factoring Blog, 11th December 2015

JMS

wine in glasses

Whilst December would normally be pretty quiet it has started in a fairly busy way although with Christmas Party season in full swing I don think this will continue.

A couple of enquiries this week and a number progressing, albeit slowly. Interestingly, every enquiry currently on the books, bar one, represents an existing invoice finance client looking for a new deal and this is not a satisfactory state of affairs. New clients are needed not just the same clients moving around the system.

It was hoped the ABFA statistics for Q3 2015 would be out by now  to reveal the net gain, if any, of new clients using asset based lending facilities, but comment will have to wait til next week.

Meanwhile the Bank of England Monetary Policy Committee voted in favour yesterday,  by a margin of 8 – 1,   of keeping Base Rate at 0.5%. The one dissenting voice, an habitual dissenter from recent meetings, proposed a 0.25% increase, reasoning that the increase was manageable given favourable lending conditions, i.e easily available funding,  faced by the business community.

Given the way votes go at these meetings my guess is that it will still be sometime before there is any interest rate rise. My prediction is likely to be more accurate than those expert economists, asked annually for their predictions who have got it wrong every year since 2009.

The Christmas Party beckons……