0845 643 9485
Call now for expert advice

Pitfalls

There is an interesting article in the Telegraph from 2 October 2020. Their business section has an article by Rachel Millard titled, “Peer-to-peer lenders face huge losses after bet on Yorkshire coal mine”

Personally, I am not sure that the headline really does the case justice but it describes multi million pound losses for Archover and Assetz Capital. There may also be losses for other lenders to these companies. The losses are attributed to the companies of Mark Runiewicz and his business partner and co-director, Mary McErlain. What makes this more intriguing is that Mary would appear to be Mark’s wife or partner.

On the Trustpilot website Archover respond to a poor review by describing the problems that had faced with UK Exim Finance as a fraud. They said, “Thank you for reviewing ArchOver.

The company you refer to is UK EXIM Finance (UEF) not EXIM. The company was not introduced by our parent company.

As you are well aware this fraud has affected a number of other lenders as well as ArchOver but our monitoring team was the first to uncover it. UEF had been a legitimate borrower for a number of years until this year. As you are aware from the multiple updates from ArchOver we are pursuing a wide range of avenues for recovery with the full support of Hampden Group, who themselves are also exposed as a lender in UEF.”

The article in the Telegraph describes how businesses owned by Mark Runiewicz and his co director and business partner Mary McErlain failed owing millions to Peer to Peer lenders. The article in the Telegraph can be seen in the images below: (please click the image to see full size)

Convertibill are an Irish lending platform that are expanding in to the UK. They provide working capital finance against confirmed orders from credit worthy buyers and also against outstanding invoices.

As business finance brokers Funding Solutions UK Ltd have had a few dealing with Convertibill and it would be fair to say that they have not gone well. It would also be fair to say that we won’t be having any more dealings with them. I would question their honesty and integrity for a few reasons. Here is a brief description of some of our interactions:

We introduced a client who provided specialist type of marine funding. Convertibill signed an NDA as the client was worried that their product would be copied. Convertibill requested more and more information and the client was suspicious that they were merely trying to obtain information from them so they could copy their approach or learn more about how to fund this type of transaction. When the client raised this the enquiry was closed down and they refused to acknowledge the signed NDA. Patrick Reynolds CEO advised, “There is no NDA from June” and despite sending him a copy of the signed NDA he refused to acknowledge it. Our client is now taking legal advice.

We introduced another client who was looking to bridge an investment transaction that included funding from the Future Fund. Convertibill advised that they could help but that they required a £15,000 commitment fee to start the process. The client paid the £15,000 and then asked if they could change the transaction. This request was the next day. Convertibill advised that they could no longer assist and that they had spent the £15,000 on legal fees and on securing the required funding. In my opinion this is a nonsense and is pure profiteering. Again, our client is taking legal advice.

As a finance broker I earn money from setting up finance facilities for my clients. I had referred a client to Mark Runiewicz of Convertibill and specifically request that he provided a stand alone trade/purchase finance facility for the client as they were happy with their invoice finance provider. Mark entered in to talks with the client and then introduced them to 3 invoice finance providers. These 3 lenders were Skipton Business Finance, Optimum Finance and Gener8. We were never advised of this by Mark but they client alerted us to this. Strangely, Mark then claimed that Convertibill had now started to fund against debtors and that they would fund the full transaction. It is my opinion that Mark was trying to broker this invoice finance requirement for himself. With one lender I checked with the lead was logged in the name of Mark’s business SC Advisors Limited who would have received the commission had the transaction completed. Putting our situation to one side it seems strange that Mark is employed by Convertibill but is introducing an invoice finance requirement to other lenders. Even more strange when you consider that is what we do as a business!! Market Finance were the incumbent invoice finance provider and they refused to work with Mark Runiewicz and Convertibill. At the time this seemed harsh to me but having done some investigation it appears they may have been concerned with Mark’s previous involvement with other P2P lenders via his business UK Exim Finance Limited and UK Exim Limited. The information at Companies House would suggest that these relationships did not end well. Type these business names in to Google and look at the filing history at Companies House. It appears that lenders lost money and a significant amount due the activities of these businesses.

Something really doesn’t feel right about Convertibill. My advice would be to proceed with extreme caution. Arguably, there are other options out there so maybe explore those.

If you are reading this as a fellow business finance broker I would also proceed with extreme caution. There are questions about how client introductions are handled but I also have reason to believe that they work hard to find ways not to pay broker commissions and may indeed pride themselves on their ability not to pay brokers. At a senior level within the business there seems to be a dislike for brokers and a willingness to find ways not to pay brokers the agreed fees.

Updated 5 October 2020.

 

I was approached by Convertibill and asked to take the post down. The initial conversation included a threat of legal action for libel if I did not take it down within 24 hours. With a view to learning more about their side of the story and as a gesture of goodwill I took the post down. However, whilst explanations were offered they did not change my opinion of what occurred. What I have posted is based on my honest opinion.

 

In addition, there has been an article published in the Telegraph on 2nd October 2020 about the businesses that Mark Runiewicz has run and the potential losses they have caused in the P2P lending sector. The articles are in the images below:

 

 

Favell Recruitment are a family owned business started by brother and sister Oliver and Alicia Favell. They are a recruitment company based in South Yorkshire that specialise in the construction sector.

The business started trading in 2014 and to finance it’s rapid growth they entered into an invoice finance facility with Aldermore Bank Plc. They set this up on a the Aldermore ABC product which is a fixed price facility and they had an overall credit facility of £50,000. Sadly, the facility did not generate the required working capital but when they looked to terminate the agreement Aldermore levied early termination fees.

Problems

The facility had run satisfactorily but they soon outgrew the facility. In order to double the facility limit to £100,000 Aldermore doubled their fee structure to £900 per month plus an additional 0.65% of turnover for bad debt protection. The facility was also restrictive as there was a 50% concentration limit on the facility and their top customer could represent more than 50% of their sales ledger. This put pressure in Favell’s cash flow as the facility was not generating the required cash.

Favell Recruitment felt that the facility was both restrictive and expensive. As a result Oliver looked to source a better structured facility. A facility was sourced from another lender that provided an increased facility limit, increased prepayment, increased concentration limit, full funding limits on all their debtors and also provided considerable savings.

Cost Comparison

Lender                                                        Aldermore                                         New Lender
Facility Limit                                            £100,000                                            £200,000
Prepayment                                              85%                                                      90%
Concentration Limit                              50%                                                      100%
Service Fee                                              £900 flat fee                                       1%
Bad debt protection                               0.65% of gross turnover                  Included in service fee
Discounting Fee                                     Included in flat fee                            2.5% over bank base rate

In terms of costs, if we analyse the fees paid by Favell to Aldermore in December we can see that despite borrowing just over £7,000 at the end of December having notified just £23,164 of invoices the fees for the month were £1,230.16. Of this, £900 was fixed cost service fee which represents 3.88% of turnover and this did not include the bad debt protection.
If the new lenders facility had been in place the costs would have been circa £450. This is a reduction of over 60% in costs. Due to the inflexible fixed fee arrangement and the low turnover in December due to the slowdown in the construction industry this may be somewhat skewed. However, the service fee element would have been just £231 compared to £900 and the additional bad debt protection.

If we assume a turnover of £700,000 and average borrowing of £75,000 the Aldermore facility would cost £16,260 versus the new facility of £10,650. Again a considerable saving of 35%.

Termination Penalties

Favell Recruitment approached Aldermore to advise that they wanted to leave. Sadly, despite the facility being restrictive and expensive Aldermore advised that there would be a termination fee.
Aldermore are members of the Asset Based Finance Association (ABFA) and on Aldermore’s own website they state that “as members of ABFA we take these commitments seriously and are dedicated to ensuring they are RESPECTED at all times.”

If you look at the ABFA Code of Conduct and more specifically the ‘Guidance to the ABFA Code’ it states:

“3.2.3 Where a client requests termination of a facility without the required or any period of notice, even though Members may not have any legal obligation to agree, they are encouraged to give reasonable consideration to such request, particularly where continuation of the facility may cause hardship to the client.”

There is obviously no legal requirement for Aldermore or any other ABFA member to allow a client to terminate a contract early. However, given that Aldermore could not fully fund Favell’s largest customer due to concentration restrictions, it could be interpreted that “continuation of the facility may cause hardship to the client” given that it was restricting profitable trading and growth with their largest customer.

Due to the restrictions on the facility and also what Oliver considered to be excessive fees, Favell Recruitment felt they had no option but to pay the termination fee to Aldermore to exit the facility.
Oliver Favell commented, “This is not a good way to do business especially after it appears they were overcharging us. We were paying a lot of money for a restrictive facility with a £100,000 limit and now we are paying considerably less for a £200,000 facility. All in all I would not recomend Aldermore to anyone ”

With a better structured and more cost effective working capital facility we wish Favell Recruitment continued growth and success.

Do you want to access invoice discounting but don’t want to provide a personal guarantee?

Invoice finance without a personal guarantee is available. You can contact Funding Solutions on 0845 251 4040

Many invoice finance providers insist upon a personal guarantee and others only insist upon a guarantee if you are factoring. This seems strange to me as the lenders risk associated with invoice discounting is higher than it is with factoring. However, the criteria for invoice discounting with these lenders if far more stringent so the personal guarantee is less important.

Why do lenders look for a personal guarantee?

A typical requirement for a personal guarantee will be between 10-25% of the overall funding line while some lenders will look for unlimited personal guarantees in the first instance.

The reason lenders look for a personal guarantee is to keep the directors interested in a failed situation. If a guarantor stands to lose money under a guarantee they will help the lender collect in outstanding debts. It may mean they need to dig out a proof of delivery or a signed timesheet to help resolve a dispute.

Are personal guarantees called upon?

Rarely are personal guarantees called upon. Invoice finance lenders are lending against outstanding invoices and their calculation of prepayment relates to what they feel they will be able to collect out in a failed situation. On that basis the outstanding debt is repaid by collecting out what is owed by customers. This can be a troublesome process so the directors or guarantors help is often vital and as already stressed the guarantee is there to keep them interested in assisting.

In fairness banks and other lenders are becoming far less reliant on personal guarantees than they used to. Mostly due to reputational risk, especially where the family home is the main asset underpinning a guarantee.

So do I have to provide a guarantee?

In short no. There are lenders available who will provide funding without a personal guarantee.

Shop around or use a reputable broker such as Funding Solutions.

Recently we were approached by a landscape gardener than needed assistance in raising some working capital. The family owned business has issues as they were working for the well known house builders. These clients would take a long time to pay and in the meantime they had to pay their workers weekly.

They had approached their own bank who were unable or unwilling to provide an overdraft facility. They referred them to their invoice finance arm who were unwilling to assist as the business was considered to be in the construction industry as they were required to submit applications for payment to the house builders like any other contractor. From there they had approached several independent invoice finance providers who were unwilling to help for the same reasons. The landscape gardener then approached us at Funding Solutions UK.

Read Full Article

The best factoring company for your business will depend on the unique characteristics of your business and importantly on your own requirement.

The main aspect of any factoring companies proposition is the structure of their facility, service levels and pricing.

Structure of a facility

It is imperative that the facility is structured to meet the needs of your business but some lenders may not be able to structure a facility to meet your needs. Some lenders have a credit policy that will not allow them to finance any debtor that exceeds over 25% of your total ledger. If you have one large customer that accounts for a large proportion of your sales ledger or all of your sales ledger such a lender would prove to be restrictive. You will need a lender that does not have such stringent criteria when it comes to concentration limits. Another example can be exports. Some lenders will simply not finance export sales so if you have export sales or are looking at export sales than you need to consider a lender that can finance those sales. Smart Factoring Quotes understand the capabilities and requirements of each lender in the market.

Read Full Article

Cashflow Finance is currently under construction as a resource to help businesses who are looking for cash flow finance solutions.

The site will be aimed at businesses who are seeking advice about their cash flow finance options.

Read Full Article

Smart factoring quotes have a new and improved website.

The site has been restructured to ensure that navigation is now easier and a bespoke quotation can be started and obtained from any page.

Read Full Article