Having sung the praises of a factoring company last week for the speed of their response it would seem that this deal is no longer going to happen.
The factor suggested taking the documents down for signature but the prospect adamantly refused to meet them saying that if the whole deal couldn’t be done by email he would prefer not to bother.
Strange fellow and I wonder what it was he was afraid of but it leaves me thinking that perhaps the factoring company involved have just dodged a bullet
It seems that certain factoring companies are speeding up the process of reviewing and taking on new clients if they are small and a couple of enquiries taken by Factoring Solutions this week have gone from start to finish very quickly.
On Tuesday we received an enquiry from a small company with only one customer that seemed to be tailor made for spot factoring so we introduced them to the appropriate single invoice factoring company and we were subsequently informed that the documents are being signed on Friday.
We received another enquiry today (Thursday) from a small company which was fairly new and where the directors were not home owners which restricted the number of factoring companies that would be interested but fortunately the company that we introduced it to were happy to look closer at the prospect and an offer was issued straight away with documents due to be signed on Monday.
It’s not all plain sailing though as we also had an enquiry from a much larger company this week and the company that I chose to speak to about them shuddered when I mentioned their name and politely declined on the basis that they had had dealings with him before and he had been a naughty boy.
Still two out of three isn’t bad
I had a telephone call last week from a very nice sounding lady who wasn’t at all happy with the conduct of her factoring facility and was desperate to make alternative arrangements.
She told me that the company had an exposure into one customer with perhaps £250,000 of the £800,000 annual turnover going to that one company who weren’t the quickest of payers.
The existing factoring company were originally happy to fund that customer up to 85% but had recently reduced it to 50% and now wanted to eliminate the funding to that customer entirely. I wasn’t quite sure why as I checked it out during the telephone call and it seemed to be a substantial company and a good credit risk. I asked what reason the factoring company had given for not wanting to fund this company and she said “none”
She told me that the company were fabricators and when asked, said that all invoices were raised at the end of the job with no stage payments or applications.
I recommended a factoring company who were well known for the quality of their service based on what I had been told.
Having spoken to the factors and asked them to make contact I did a company search on the prospect and was surprised to find that the company name that she had given me had gone bust three months ago but assumed that the factor would get to the bottom of it.
I was rather surprised when the factoring company telephoned me the following day to tell me that he had a long chat to the husband who informed him that the business was all subject to JCT contracts which was why the existing factor had reduced the initial payment to 50% which was a level that they would continue to fund at and that the limited company name that I had been given had gone bust due to contractual problems on a substantial job where the customer had refused to pay.
It seems that the only facts that the nice sounding lady had got correct were her own name and their telephone number and when I spoke to her on the following day I suggested that in the circumstances I recommended that they stay with their existing factors and try and make it work as I probably wouldn’t be able to source anything significantly better.
I had a telephone call from a factoring company on 11th September and they weren’t ringing to wish me a happy birthday but to tell me that one of the clients that I had placed with them had been a naughty boy and that a meeting had been arranged to discuss whether or not the company was insolvent and what action would be taken.
This was the second factoring company that I had placed this company with as the first wanted it managed it away as he had breached the agreement several times with them too so I placed it with the current funder having first read the riot act so that he was well aware what would happen if he misbehaved again.
On Thursday I had a phone call from a different factoring company telling me that the one client that I had with them had given notice as they were transferring to one of the smaller factoring companies that I wouldn’t give houseroom too due to their reputation for signing up clients first then doing due diligence afterwards.
It seems that this company had also been skating on thin ice with several substantial invoices being re-aged plus other little tricks of the trade. The client had requested an increase in their facility limit which the factor rejected as turnover hadn’t grown.
As if September wasn’t bad enough I had a call on Friday from a third factoring company to tell me that my largest client was about to cease trading as they had fallen out with their major supplier. The owner also decided that he had enough of the business and didn’t intend to restart.
I’ve had enough of September already and can’t wait for October even though a rather nice £30m turnover invoice discounting enquiry has helped take the sting out of the month
Rumours are reaching our ears that one of the big bank owned factoring companies has just taken a £7m hit due to client fraud. This seems to be one of the old fashioned long firm frauds where the company was set up purely and simply to defraud the factoring company.
Also one of the higher profile recruitment back office funding companies has also suffered a £500,000 fraud hit with the apparent fast growth of the recruiter being based on fresh air. Rumours have it that this company is now closed for new business and all of the salesmen have been sacked although I would have thought it was the operational staff that were negligent in this case.
It seems to be the fashion in the media at the moment to knock factoring companies but client fraud has always been factoring’s major problem. Shame it doesn’t make such exciting reading so it rarely gets mentioned.
Rumours have come to my ears that Metro Bank are currently doing due diligence on SME Invoice Finance. Whilst I originally didn’t intend to name the factoring company Sky News have published details so I have now edited my original post to include the name.
If anything further happens you won’t read it here first as I’m off on vacation next week
Amendment added 02/08/13
In actual fact the takeover has been signed, sealed and delivered and a public announcement will be made after the weekend.
This is an interesting takeover where the benefits to SME Invoice Finance are immediately obvious and I have been assured that the company will continue to be run the same way as before which I think is really good news as the service they offer their clients is first rate.
The take-over bid was announced this morning and Ultimate Finance will become a wholly owned subsidiary of the Renovo Group PLC which commented that it wished to become a prominent provider of credit facilities for UK SMEs and that the Renovo Board will continue to evaluate further acquisitions and alternative routes to access funding for SMEs at commercial rates which are accretive to the strategy.
I’m still uncertain why a cash rich shell company would wish to get involved with a factoring company that is struggling to make any real headway in a market sector that is itself struggling. Renovo claim in the offer document that they will be “continuing to innovate the business model through a more technology focused platform” but as anyone who knows Ultimate will be aware any problems that they have in the marketplace aren’t technology based but are more to do with continually changing direction coupled with a revolving door policy with sales staff that has now probably made it difficult to attract good new salesmen
Another interesting comment in the document was “The recommended acquisition of UFG is the first step in implementing Renovo’s strategy of building a new force in SME lending and growing considerably in an underserved sector” I don’t know who was telling them that the factoring market is underserved but whoever it was probably has a rapidly expanding nose as most of us insiders feel that there are too many players in a market that has been going nowhere for the last few years
Ultimate Finance has received an approach from Renovo Group PLC that may or may not lead to a takeover bid in the legalese jargon of the Stock Exchange.
Ultimate have confirmed that discussions have been on going with Renovo which is a non trading company with a net asset value of £27m and a previous history in the pharmaceutical industry.
To the outsider this is a very unusual fit as Renovo is a shell company with no expertise in any form of finance let alone a niche product like invoice finance and it does make me think why, with a history in pharmaceuticals they have decided that a factoring company is the way forward for them.
It makes me wonder if there is more to this than meets the eye and if Renovo Group are in league with someone else who does have industry expertise – but there again I’ve always loved a conspiracy theory
Keen readers of the factoring blog will have read my “What’s going on at Aldermore” post last week where I was lucky enough to spot a software glitch in LinkedIn and take a screen grab before it disappeared.
It seems that at least one of the three people being “honoured” didn’t see the funny side and complained to Aldermore management and I had a phone call today from the Legal Counsel and Company Secretary of Aldermore Bank PLC who said that if I didn’t remove the blog post they would consult external lawyers with a view to prosecuting me for defamation.
It seems that not only do the staff of Aldermore Invoice Finance have no sense of humour but they also don’t have much of an idea of what constitutes defamation as nothing that I said was defamatory in the slightest. In the interests of harmony I have removed the post but if anyone looking for a factoring company deems a sense of humour to be important I’m sure that you’ll know know where not to look
All of the factoring companies that we deal with are committed to the new ABFA code of conduct with training sessions being held to ensure that all staff members fully understand the Code.
The factoring companies are contacting their introducers to confirm that they are fully compliant with the code and outlining the terms on which they will do business with the brokers. We have already seen and responded to a fairly lengthy agreement from one of our panel of factoring companies and have today received a much shorter version from another factor which I thought I would reproduce in part so that those sceptical onlookers could see how seriously this matter is being taken:-
“As a member of the Asset Based Finance Association (ABFA), XYZ Factors is committed to implementing the new Code of Conduct which comes into effect from 1st July 2013.
The aim of the Code is to ensure that clients are treated with honesty and fairness with all facilities operated in a professional and transparent manner.
With these principles in mind the code requires that:
All terminology relating to notice periods, termination fees and collect out fees must be clear and transparent. All collect out fees will need to be justifiable and the ABFA Member may have to provide confirmation of how the collect out fee was calculated.
Furthermore the Code does not allow for any payment to a third party of any portion of a collect out fee.”
Needless to say Factoring Solutions is more than happy to subscribe to those ideals and will in fact only deal with factoring companies who are fully committed too