Interesting changes to invoice finance trading platform

One of the more high profile growth products in the invoice finance industry is the use of invoice trading platforms which is a form of invoice finance that is becoming better and better known thanks to the intensive PR efforts of one of the major players.

Of the two major players I far prefer the Platform Black operation to that of Market Invoice as the company is run by experienced factoring professionals who are available to speak to if there are any queries or questions whereas as far as I can gather Market Invoice is run by a sophisticated piece of software and the customer service is all but non existent judging by the complaints received from dissatisfied users who have tried it but prefer the offerings of companies with people that they can talk to.

Invoice trading online, a disaster waiting to happen?

I have often thought that invoice trading platforms are a disaster waiting to happen as very little (if any) due diligence is done on the invoices being sold by at least one of the major players and if any invoices become uncollectable it isn’t the trading platform that will suffer as it’s not their money anyway but it’s the investors who will lose out as they invariably have no in depth knowledge of the background or validity ofo the invoice that they are funding.

approved by factoring blogPlatform Black have come up with a rather novel concept by offering to underwrite the first 10% of any losses suffered by an investor which I think is as admirable as their comment that they should “man up and put some skin in the game” is absolutely dreadful.

The fact that they are claiming to have only suffered one bad debt in the last 15 months is testament to the benefit of having the company run by factoring professionals even if they seem to have the PR skills of a Chicago rapper.

Long may this continue.

IGF Invoice Finance has been sold

I was rather concerned when I read the press release about the recent sale of IGF Invoice Finance as it was using phrases such as “Spring Ventures, a private equity investor specialising in management buyouts of UK companies with strong growth potential, today announced that it has backed a group of experienced commercial lending professionals to buy…..”

I am old fashioned enough to prefer factoring companies that are run by factoring professionals and not commercial lending people as the disciplines are completely different and recent history have seen factoring companies going backwards after having been acquired by “experienced commercial lending professionals”.

We have already seen one of my previously preferred factoring companies SME Invoice Finance taken over by a bank only to lose it’s soul and turn into yet another bank owned sausage machine that says one thing and does another.

Empty OfficeUltimate Finance used to be high on my preferred list of factoring companies but is another that once taken over lost most of it’s senior factoring personnel to be run by money boys, one of whom recently stated that he wasn’t happy paying introductory commissions to brokers and thought it would be more profitable to cut out intermediaries.

To a company that relies almost exclusively on introducer lead new business that comment made about as much sense as suggesting that they get rid of all the staff to save on wage costs.

IGF Invoice Finance is an interesting company with a chequered history as many years ago they had an excellent reputation for their service levels which was ruined at a stroke when they introduced a new computer system without testing it properly and without running it in parallel with their existing system as it failed to work as expected resulting in their clients scrambling to find alternative factoring arrangements.

Broken ComputerAs if that wasn’t enough they decided to expand by taking over another factoring company with Dynamic being the recipient of their affections. Unfortunately Dynamic were less than enthusiastic about being taken over so refused access to their books whereupon instead of doing the sensible thing and looking for another target IGF launched a hostile bid without doing due diligence resulting in them managing to buy the company and subsequently finding that the debtor book they had acquired was of a lower quality than they expected (that’s me being diplomatic)

Having committed two cardinal errors IGF brought in a completely new management team that has managed to work through the problems caused and for the last few years has earned a reputation as a well run company with a good reputation for service levels.

Let’s hope that this situation continues but I do find it a major concern that the press release is full of details about the new commercial finance boys that will be involved in the running of the company but has absolutely no mention of the existing management team that have given IGF the reputation that it has in the market today.

Factoring companies short sighted attitudes

In the current economic climate factoring companies are finding new clients harder to come by so they are supposedly making a bigger effort than ever before to hang on to existing clients although too many take a short sighted view to earning profits which works against long term profitability.

I was chatting to a factoring company salesman last week who happened to mention that they were in discussions with a client of a competitor who was being “ripped off” (his words, not mine) by his existing factoring company.

The company started factoring a couple of years ago as a new start and paid an appropriate factoring commission for the small turnover and risk. In the intervening years turnover had grown to £2.5m and they were still paying the same rate .

factoring company commission rateUnless there were serious problems with the facility I think that everyone would agree that a commission rate for a new start turning over £150,000 is completely inappropriate for a company that the factor has two years ledger experience of and has grown fifteen fold so in my mind it serves them right that they are about to lose this cash cow and I can readily understand the factoring company salesman’s righteous indignation

Two days later I had a phone call from another company who had a remarkably similar story to tell as they started factoring four or five years ago when turning over £250,000 and were given an appropriate rate for the size plus a facility limit of £200,000 which was quite generous at the time.

The reason for the call to myself was that this company had also grown significantly to it’s current level of £2.5m turnover but not only was their factoring company unwilling to offer much of a rate reduction they had also refused to increase the facility limit.

The client was effectively operating on an Initial Payment of 25% and was so hamstrung that they had resorted to borrowing money to fund the gap that factoring was supposed to fill.

What made this interesting was that the factoring company involved was the very same one that was trying to take the moral high ground on the first case.

factoring company short sightedSpeaking as someone with a predominantly operation background I find this sort of greed to be very short sighted as whilst both factoring companies have earned a high income in the last twelve months if they had been less greedy they would have continued to earn a smaller income for potentially many more years.

I speak to a lot of factoring company salesmen and they all agree that life is tough at the moment yet there are salesmen for two factoring companies whose first few clients will not help to grow their employer but will simply replace clients that their company’s shortsightedness has lost them.

If any factoring company thinks that will get away with excessive rates for long they are mistaken as there are a number of brokers out there who spend their day contacting factoring company clients to find any excuse to move them on and thus earn themselves a commission.

That is not the business model of Factoring Solutions as we don’t cold call anyone but if you feel that your company is being charged excessive fees please feel free to contact Ian Johnston on 01827 707680 for a friendly, informal chat with no obligation whatsoever and of course, completely free of charge at all times

A factoring broker’s unproductive day

I had two telephone calls yesterday enquiring about factoring.

The first was a recruitment company who had a funding and back office facility with a back office funding company that I had never heard of but who had been causing them problems for a while with their poor service which was why they were now looking to change.

I don’t really like these back office companies that obtain their funding by “refactoring” with a proper factoring company as not only does the client lose part of their identity but also any problems suffered by the funder can filter down to the client whether the fault is theirs or that of another client.

This particular funder registered a charge to RBS Invoice Finance six years ago but six months later that charge was satisfied and a further charge granted to Bank of Scotland.

Two and half years later that charge was satisfied and a further charge registered to Lloyds TSB Commercial Finance but that only lasted nine months until the business transferred to Leumi ABL where it remained until transferring yet again to Close Brothers eighteen months ago.

Hardly a steady business relationship and the big red flag at Companies House stating that the Annual Return is overdue doesn’t inspire a great deal of confidence either.

I suggested that the company might be better off utilising the services of one of the factoring companies that ran their own payroll services so there was no hidden middleman to potentially upset the apple cart and that would also have another positive advantage that the company would regain their own identity instead of being subsumed into the funding company’s own identity but the lady that was talking to me decided that she didn’t want to operate that way and was happy as she was but would prefer a different funding company.

It was fairly obvious by the conversation that she wasn’t the decision maker but was happy with the way that things worked currently and didn’t want to work with a proper factoring company.

Fortunately I’m too long in the tooth to have to argue with someone who clearly thinks she knows best so I ended up telling her that regretfully I couldn’t help her.

A couple of hours later I had another call from someone looking for a factoring company who wanted to know what my charges were. I explained that I was a broker and my job was to source the most suitable factoring company for his particular needs and there would be no charge for doing that to which he replied that he wanted to contact factoring companies direct and didn’t wish to use a broker. I wished him good luck in sorting the wheat from the chaff and finding himself a factoring company that performed as well as they claimed and ended another unproductive call.

Hopefully today might bring enquiries from people who aren’t quite so set in their ways and might listen to someone who knows what he talking about

Christmas entertaining and marketing foolishness

The Christmas entertainment season is now under way and yesterday I was a guest at Bibby’s Birmingham office bash where we all met in a well known hostelry in the city centre prior to moving off to a restaurant for lunch.

Christmas drinksThere were probably twenty of us milling around when a chappie came in and wandered around looking lost until he came up to us and asked “I don’t suppose that you lot are Ultimate Finance” at which I laughed and said “You’ve got the dates wrong as that’s tomorrow”

Mein host then suggested that as he was here he might as well have a drink with us and as one of the original invitees had dropped out he may as well join us for lunch, which he subsequently did.

I held up posting this until such time as it was unlikely that anyone from Ultimate would read it prior to them all meeting up and cross examining their guests to save him embarrassment.

I was invited to today’s do but unfortunately I couldn’t make it which is a shame as I would have liked to watch ********’s embarrassment when he spotted me there 😀

On a completely unrelated note I had a telephone call this morning from Rachel at Impact Marketing who wanted to make me rich.

UnbelievableShe said that they had been acting for a factoring company and had been so successful in generating business for them that the factoring company could no longer cope which is why they had targeted Factoring Solutions as a replacement to act for.

When I politely suggested that there was no such thing as a factoring company that couldn’t cope with new business and most were struggling to attract sufficient new clients she became quite indignant and suggested that just because I was struggling that doesn’t mean that other factoring companies were, whereupon she wished me a Merry Christmas and the line went dead.

It’s a shame that people like Rachel have to resort to bull**** as I doubt whether anyone would be either taken in or be impressed by such blatant rubbish and it’s also a shame that she didn’t do a couple minutes of homework first whereupon she would have found out that Factoring Solutions wasn’t a factoring company.

Of course if there is a factoring company out there who has been so inundated with enquiries and new business that they can no longer cope please feel free to get in touch with me and I will happily post a retraction as well as offer to look after the excess leads that they can’t cope with.