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23 Dec

Invoice Finance – Overview of 2010 »

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It is interesting looking back at 2010. Late in 2009 a lot of people were hoping that we see a return to normality, not just in the invoice finance market but also in the world at large. I think that I was one of those people and possibly more in blind optimism I thought that we would start the year and be very busy.

The year got off to a very slowly start as the snow only served to compound the hangover from Christmas and the doom and gloom from 2009. From there I heard various excuses as I spoke to people through the year including pre budget and post budget caution, pre-election and post election caution, let’s not forget the volcanic dust cloud, the build up to the world cup, the world cup (I was there and wish I could forget it) and the post world cup blues. However, we saw a big increase in inquiries after August – maybe it is the pre Ashes optimism!! Who knows.

Looking more specifically at the invoice finance market I think we have seen a fairly interesting year. We have seen acquisitions and possibly some unexpected ones – the Ultimate takeover of Ashley is one that springs to mind. On top of that we have seen the launch of some new players such as Innovation Finance and Team Factors who will hopefully prosper. I also think we have seen a new look Hitachi in the market place who are fairly vanilla in terms of appetite but their pricing is aggressive enough for the banks to worry and they have deep pockets and good service levels to go with it which can only be good for the end customer. We have seen the rebranding of Cattles to Absolute Invoice Finance and then rebrand again as Aldermore Invoice Finance – part of the UK’s newest bank. Importantly we have seen lenders return to the market and genuinely compete on price which again is good for clients.

From a personal perspective as a broker the year has been a good one and we have strengthened some relationships, initiated others and it would be fair to say we have cooled some off. Good relationships with invoice factoring companies is important to our businesses for a number of reasons. It allows us to understand the criteria and capabilities of those lenders which means we can place clients with them safe in the knowledge the client will be happy. This is our ultimate goal. We have lenders who share this mindset and as such we have developed longstanding relationships with them. Some new lenders have been a real revelation and we have been delighted to form working relationships with them – these would include IGF Invoice Finance, Hitachi and Partnership Finance. The flip side to this unfortunately are the lenders where we have cooled things off or in some instances cut ties altogether. We have discovered some fairly unsavoury practices by one lender this year and as such have chosen not to deal with them going forward. Another lender has caused a huge amount of e-mail traffic in complaints as they simply refuse to communicate with clients and as such we have cooled things down.

We remain focused on developing long term relationships with clients and our aim is to find them the best possible invoice finance provider to meet their circumstances. We help to structure the best possible facility and explain all costs and obligations so an informed decision can be made.

I was thinking of writing some predictions for 2011 but I fear more uncertainty ahead so I will save my blushes!!

15 Nov

Factoring – Collect Out Fees and Early Termination Fees »

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I have recently been participating in a forum hosted by the factoring.

It was unfortunate that the majority of posters were passionately negative about the invoice factoring industry. Their main gripes seemed to revolve around:

  1. The work between the invoice finance providers and the insolvency practitioners that they did not believe was in the best interest of the actual client.
  2. Hefty early termination fees when a client looks to leave.
  3. Hefty collect out fees levied in the event of failure
  4. The lack of transparency with regards to pricing and hidden charges.

There were perhaps half a dozen passionate posters on the thread who had suffered bad experiences. This is in comparison to over 42,000 businesses that actually use invoice finance.

However, it does suggest that there are some unsavoury practices within the industry that should be stamped out.

11 Nov

Invoice Factoring – Maximise Prepayment »

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Invoice Factoring – Maximise Prepayment

We have discussed several times on this blog that headline rates from invoice factoring companies can be misleading. If we put pricing to one side we can look at how you can maximise the amount of cash that your facility will generate.

Debtor Limits – some lender will assess each individual limit while others will only check debtors over 10% of the ledger. It is important you can get funding against your debtors. If you can’t the prepayment level is a red herring.

Minimise Dilution – the higher the number of credit notes you issue the lower the prepayment a lender will offer you. It is therefore important to concentrate on the quality of administration, pick & packing, etc.. to ensure credit notes are kept to a minimum.

Additional Security – lenders may look to increase your prepayment level if you can offer additional security. This could take the form of a personal guarantee, a charge on some unencumbered machinery or a charge against a property. It is really a show of confidence from you as a business owner and offers the lender additional comfort.

Change in Facility – if you have an invoice discounting facility you may get a better prepayment level if you move to a disclosed facility such as invoice factoring. It gives the lender more comfort and as such they may be willing to increase their exposure by increasing prepayment levels.

02 Nov

Bankers – The New Retailers »

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It was while reading another forum I realised the frustrations business owners have with modern day bankers. In short they are constantly trying to cross sell business owners products they either don’t need or can get elsewhere for cheaper. However, when it comes to lending money they are rarely anywhere to be seen.

The modern banks that populate our high street today consider themselves as retailers and this is a message delivered to the employees of these banks on a daily basis. The buzzwords such as ‘cross selling’ are the main focus of all the banks and this theory is supported by businesses who apply for loans to help grow their businesses only to be bombarded by calls to sell them insurance.

It is fair to say that anyone that you meet face to face in a bank or speak to on the phone will have some sort of sales target. These targets drive behaviour and unfortunately advice.

The redundancy policies of the banks over the last decade have seen experienced bankers and lenders replaced with young sales people. The decision makers are a minority of people in an ivory tower they call the credit department. As such you are relying on the report that your ‘sales contact’ will submit to this credit department. Far from ideal as your contact will have spent more time attempting to sell you insurance than they have understanding your business and it’s real requirements.

The invoice factoring industry is not altogether different. It remain sales focused but on the whole it concentrates on products it understands and delivers. Another important difference is access to decision makers. Within the invoice finance industry it is possible to access decision makers and as a business you can really benefit from this.

28 Oct

High Street Collections »

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High Street Collections is a new collections company with a new approach based in the North East of England but with a national presence.

So why is the approach new?

Well their approach is professional and not heavy handed. It also involves visits to non payers along with the usual letters and telephone calls. While this may not be new, the approach is solutions focussed and this is new. High Street Collections focus on meeting with a debtor to establish if it is a case of ‘can’t pay’ or ‘won’t pay’. From there they look to establish the validity of any disputes and then find a solution as to how the debt can be paid. The key is stressing to the debtor that the debt is not going away and as such it is better to find a palatable solution.

Their success rate in collections is 87% and this incorporates collections from debtors that range from private individuals to major corporates.

High Street Collections act or aim to act for SME’s, finance companies, factoring companies, insolvency practitioners and banks.

It is important to remember that the benefits to clients include:

  • No upfront legal fees.
  • Improved cashflow from the recovery of debt.
  • Improved profitability by reduction of bad debt.
28 Oct

PayFactory »

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PayFactory is the new name of Calverton Business Support which provides invoicing, finance, credit control and payroll management to recruitment companies. Their aim is to become the market leader in recruitment finance and back office support.

Essentially it allows a recruitment company to outsource the areas they do not enjoy and concentrate on recruiting. It also offers peace of mind that their workers will be paid correctly and on time.

We have been told to expect some heavy marketing and PR in coming months.

It does however sound as though work still has to be done on the website to allow for uploading of schedules online and viewing of reports online.

If you wish to consider a facility from payFactor please contact Smart Factoring Quotes today. We can explain their offering in more detail. Importantly we can also explain the other options available to you from other providers.

26 Oct

Declined – What can you do? »

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If you have been declined for an invoice finance facility what can you do? Well I guess to provide an accurate and short answer I would need to understand why a facility had been declined however we can look at some general advice:

  • If it is because you operate in a particular sector such as construction it is worth looking for a specialised lender.
  • If it is because your business is too large or too small for the lender you approached use the market place and look for an alternative that actively targets businesses of your size.
  • if it is because of adverse credit history of the business or the directors look at alternative lenders but it is wise to be totally upfront and honest. Explain what happened, why it happened and why it won’t happen again.
  • if it is because of financial performance look at other lenders. Not all lenders are concerned with financial performance.
  • If you have looked for invoice discounting but have been declined perhaps you would qualify for another type of facility such as CHOC’s or factoring.
  • You could always consider asking for a reduced prepayment level.
  • Consider asking a lender to cap your facility to limit their risk.
  • Can you offer additional security to show the lender you have confidence in the business?

It is important to remember that all lenders have different criteria so it is worth shopping around. Smart Factoring Quotes would be happy to undertake a market review and advise you of your options.

24 Oct

HMRC – Time to Pay Agreements »

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HMRC are trying to agree 9 month repayment plans with businesses for PAYE and VAT arrears. However, it is possible to negotiate better and more reallistic terms.

In my dealings with businesses as an Invoice Factoring broker I come across a lot of businesses who have some form of arrears with HMRC. Often the invoice finance company will put a condition in their offers that the business must have a time to pay agreement in place for these arrears.

A time to pay agreement is a formal repayment plan that has been agreed by HMRC.

Unfortunately HMRC in recent months have been very aggressive when negotiating these and have been advising everyone that the maximum term is 9 months. This is often unrealistic and in most cases simply postpones the winding up petition.

So why do businesses agree to these repayment schedules that they can’t meet? I think often they are feeling the pressure. They are typically not used to dealing with the big beast that is HMRC and are worried they will wind them up. The requirement from the invoice finance company to have a repayment plan in place also adds to this pressure. A delay in obtaining the finance could mean business failure and as such there is relief in agreeing to any repayment plan.

I was speaking to a company that specialise in negotiating better terms for these agreements and they are negotiating between 18 months and 3 years. Their emphasis is in proving the repayment plan is what will work and is realistic. Their track record helps as they have a relationship with HMRC but it can be done by individual businesses. It is important to have cash flow forecasts to support your argument but it is well worth standing your ground to reach a conclusion that is ultimately more beneficial to both parties.

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