Factoring Blog News, views and gossip from the world of factoring and invoice discounting

It’s been quite a busy year with several small factoring companies either going bust or being taken over or both and with all existing factors finding it tough going.

I would imagine 2010 to see much of the same with one factoring company about to be taken over which I guess will be the first of several in the coming year.

However tough the market there never seems to be a shortage of people clamouring to get into it. Whilst some do it as they need to provide themselves with an income and they see the setting up and running a factoring company as the route to do that others have a genuine desire to be in the business. Santander comes into the latter category and with many of the country’s best loved names now part of the group one can hardly blame them even if they chose a most unusual way of doing so. There is also another new factoring company to be launched shortly which I have no doubt should be successful as there are no pressures there to take on business at all costs as seems to be the case with several of the more recent newcomers.

One of my hobby horses over the year has been the plethora of awards handed out to all and sundry with almost everyone being able to claim some sort of award for being the best factoring and discounting company of the year and as if to round off the year nicely a press release landed on the blog’s desk from Business Moneyfacts announcing a forthcoming event to “celebrate the best products and service in the business and commercial finance world”

The nominations for “Best Factoring & Invoice Discounting Provider” are:-

Absolute Invoice Finance
Bibby Financial Services
Close Invoice Finance Limited
Credit Agricole Commercial Finance
IGF Invoice Finance Limited
Venture Finance PLC

I have no idea who decides on the nominations or even how much they know about the marketplace but it always seems to be the same old companies that are nominated and the one thing that most have in common is their love of self promotion.

Of this year’s nominations Absolute Invoice Finance and their clients must have wondered if they would see out the end of the year as the previous parent Cattles were in such a parlous state whilst Close and Venture seem between them to be responsible for a disproportionate amount of the complaints that one regularly reads about on forums and blogs around the country.

IGF Invoice Finance is a company that has been top of many people’s lists of “who won’t be around this time next year” for the last two years and there are still mutterings in the marketplace about them.

That leaves just Bibby and what was Eurofactor and I freely admit that I don’t know much about the latter.

I wonder why these companies don’t approach me for a list of nominations

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Posted under Absolute Invoice Finance, Bibby Factors, Factoring companies, IGF Invoice Finance, Venture Finance

A couple of months ago there was a rather “interesting” factoring case doing the rounds being a restart of a printing company that had gone bust defrauding Lloyds TSB in the process with loads of fresh air invoicing and as one would expect it was declined by all of the established factoring companies.

Much to my surprise I heard that this challenge had been taken up three weeks ago by one of the new kids on the block with a funding limit of £250,000

I have since heard that the factoring company are not happy with this partnership and are trying to unload it already giving the reason that they can’t offer more than £250,000 and the company really needs more than that.

The printing company obviously think that the more brokers they put it to increases the likelihood of finding a mug factor to take them on as there are currently at least two of the highest profile factoring brokers touting this around using the line that “this is a good little deal”

Neither broker is incompetent so they must be aware that all is not well with this particular deal and are hoping that the factoring companies that they are asking to look at this are too dumb to notice but that probably won’t be the case and the brokers will end up with their reputations tarnished whilst the new kids on the block will be keeping their fingers tightly crossed that they aren’t going to go the way of their predecessors already

Posted under Factoring companies

It has now been confirmed that the factoring book of GMAC Commercial Finance has been put up for sale as the parent company looks to pull out of UK operations entirely.

This is rather sad as those of us who have been around a while will know that this company started life as International Factors which was a subsidiary of the then Lloyds Bank and was regarded at the time as the market leader as well as a leading innovater. Lloyds Bank also had another factoring subsidiary in the rather down market Alex Lawrie Factors and it was decided to keep this company and sell off International Factors thus starting the downward spiral from market leader to the relatively unknown that it is today.

It would be ironic if the assets were bought by Lloyds TSB thus completing the circle.

Posted under Factoring companies, GMAC Commercial Finance

It may well have been a big surprise to many people but the press release sent out earlier this week announcing that Cattles is shaking off it’s rather downmarket image by rebranding as Absolute Invoice Finance will have come as no surprise to readers of this blog as we gave away their secret way back in April.

When writing the text for Factoring Solutions website ten years ago in 1999 I added the quip that “many companies using invoice finance to speed up cash flow still find their factor by looking in Yellow Pages – which is surely why there are so many factors beginning with the letter A” and it gives me great pleasure that the powers that be at Cattles have heeded my words

I doubt whether many people use Yellow Pages any more but there are obviously web directories that list factoring companies in alphabetical order so Absolute will jump up the queue with their name change and regain the position that they had when they used to be known as Argent Commercial Services.

I wonder if anyone will now consider changing their name to Aardvark Factors to get pole position

Posted under Cattles Invoice Finance, Factoring companies

I wrote a story in April (http://factoringblog.co.uk/?p=204) saying that whilst I was away sunning myself a raft of different factoring companies had all won awards for being the best factoring company according to a variety of different publications.

Having returned from topping up the tan again I found two more emails in my inbox from companies announcing their recent awards.

The first was from Leumi ABL to tell me that they had been voted “Asset Based Lender of the Year” according to ACQ Finance magazine’s Country Awards for Achievement 2009 and according to the blurb “The accolade is the result of a totally independent poll amongst industry peers”

The second was from those masters of self promotion Venture Finance who were awarded “‘Independent alternative finance provider of the year” by….. wait for it….. ACQ again.

Whilst I’m sure that both Leumi and Venture feel proud of their awards a look at some other of the award winners may put them into perspective as “ALMT – Best Indian Commercial Law Firm of the Year”, “Aviation Law Firm of the Year – Latin America, “Insurance & Reinsurance Law Firm of the Year – UAE”, “Shipping Law Firm of the Year – Hong Kong”, “Shipping & Maritime Law Firm of the Year – UAE” and “Specialist Law Firm of the Year – Aviation – UK” were all won by the same company – Clyde & Co

Is there anyone who hasn’t won an award from these people

Posted under Factoring companies

We had an enquiry last November from a company who had a successful relationship with an independent factoring company but had been tempted away to one of the bank factors with talk of cheaper rates.

Within 3 months the unapproved debts had risen from £700 to over £40,000 and it became apparent that despite paying for a full credit control service the factoring company were actually not doing much at all so the cost of the facility had risen whilst the lack of cash flow due to the increase in unapproved debts was slowly strangling the life out of the company.

I introduced the company to one of the independents who are known for their excellent service levels and thought that would be the end of his nightmare but unfortunately that was not to be the case. The new factor was never able to buy out the investment of the bank factor as the lack of credit control had left the ledger in an unholy mess.

As the factoring facility was plainly not working the company stopped sending invoices to the factor and and has been struggling to self fund for the last few months. Speaking to them today it seems that the outstanding factored debts now total over £160,000 all of which is overdue and unapproved.

The company now wish to take legal proceedings against the factor for non performance on the basis that they paid them for a full sales ledger service including credit control that the factor has failed to provide.

Although a factoring agreement will be worded in such a way that the factor is not responsible for anything I’m sure that would not hold up in a court of law if it could be proven that they were negligent but has anyone successfully sued a factoring company for inadequate performance?

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Posted under Factoring, Factoring companies

When reviewing the first half of 2009 I started by looking back at comments I made at the beginning of the year in connection with my expectations for the factoring market as well as general comments.

My comment that “I guess that with the banks’ reluctance to lend money and the general state of the economy it is only to be expected that enquiries for factoring and invoice discounting would be running at high levels in 2009” proved to be miles out and whilst Factoring Solutions did receive a record number of enquiries in January, that didn’t last long and the enquiry levels drifted downwards to it’s current very poor level.

It would seem that rather than using the banks’ reluctance to lend as a reason for turning to factoring and invoice discounting the SME sector has decided that in these uncertain times they don’t want to commit themselves to a factoring agreement with it’s associated costs if the opportunities for expansion won’t be there.

Talking to other brokers it would seem that most are fairly quiet with the exception of those owned and operated by insolvency practitioners who are busy with pre packs of existing factoring clients that have failed or other companies that need factoring to provide working capital for the restart.

The only other sector of the broking community that has done well in the first six months of the year are those that have built up strong relationships with the bank owned factors by dint of introducing companies to their own bank in return for a fat fee. Now that the banks have decided to move the goalposts they have found themselves with a large number of clients that no longer fit their new criteria and those clients who find themselves surplus to requirements have been handed over to the banks’ pet brokers to find them new homes.

Highly lucrative work if you are of that mindset but here at Factoring Solutions we run an ethical broking service where the needs of the customer are paramount.

If the ABFA stats are to be believed (and I have my doubts on that score) the figures for the next quarter will be interesting as the number of clients will have gone down again as more and more fall by the wayside.

It would seem that those factoring companies that were a little choosier in the past are the ones that are suffering least at the moment as whilst their books are still contracting the rate is much slower than average. It is the factoring companies that used to operate on the basis of “If it moves sign it up and if it doesn’t move still sign it up” that are suffering more at the moment with much larger numbers of client failures with their consequential impact on staff time as well as bad debts.

Most factoring companies are now looking much closer at new business propositions with such things as single debtor deals much more difficult to place and those with concentration problems also being studied more carefully too.

continued….

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Posted under Factoring, Factoring companies, Invoice discounting, factoring brokers

As most industry insiders are aware a large number of independent factoring companies are funded by the big banks by means of back to back facilities. It occured to me that it’s possible that some of the 35 companies with annual turnovers in excess of £100m recorded in the quarterly statistics of the ABFA are actually the factoring companies that Lloyds TSB Commercial Finance and their ilk are funding.

If that is the case then all of the statistics are grossly inaccurate as many of the figures for the independents will have been included twice – once as the £100m+ funding from Lloyds TSB to the factoring company and again as the same funds are put out to the many clients of the factoring company.

I did ask some of the great and good of the factoring industry if they knew the answer but all said that whilst it was an interesting question they didn’t know.

Posted under Factoring companies

The Asset Based Finance Association (ABFA) released their statistics earlier this month which summarised the factoring and invoice discounting activity of their members for 2008

The headline figures were that the number of active clients at the year end were down marginally to 48,152 whilst the advances outstanding at the year end rose by nearly 8% to £17billion and I guess that the initial reaction is that the figures are typical of what one might expect in the current economic climate with increasing pressure on companies cash flow resulting in higher funding levels overall.

The two interesting statistics that caught my eye were firstly that of the 48,152 clients using factoring and invoice discounting at the end of the year 248 of them had annual turnovers in excess of £100m

Advances to clients at the year end were £17 billion but a quarter of that sum was advanced to the 0.52% of clients with sales in excess of £100m and those figures skew the averages so much as to make them meaningless.

The other statistic that intrigued me was that the largest client sector in terms of annual sales was the zero to £500,000 sector with 18,500 clients which represented 39% of the total. The number of clients was virtually static compared to the end of 2007 but the advances outstanding to them at the year end was up from £542m to £908m which was a huge 40% rise

One would think that in the ordinary course of events that should be impossible. If we asssume that the average client has an advance rate of 80% and always has done – how could the overall average jump by 40%.

One possibility is that the figures include a large number of terminated accounts whose balances have been inflated by “extra fees” but the difference between 2008 and the previous year is £360m which is a hell of a lot of fees so I sincerely hope that is not the case.

If anyone has any other theories please feel free to post them here.

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Posted under Factoring, Factoring companies, Invoice discounting

The factoring market has long been very competitive but when prospective factoring clients compare quotes from a number of different providers they often just look at the headline rates without bothering to delve any further into the small print.

We came across a company recently who banked with RBS and had naturally approached RBS Invoice Finance for a factoring quote. According to the prospect the quote for factoring the debts of this £300,000 pa turnover company was “a little on the high side” but it wasn’t until they emailed the quote over that I realised quite how high it was as it included a setup charge of £1,500 which is three or four times the size that most of the independents would charge but the real sting in the tail was the 1% renewal fee which I must admit was a new one on me.

Asking around it seems that RBS Invoice Finance wasn’t the only factoring company to charge renewal fees as HBOS also used to do it.

I was discussing a quote for an invoice discounting facility with a provider today and I asked him whether he had quoted a renewal fee and his reply was that his company didn’t charge them whereupon I suggested that he should have put renewal fee – none in his quote as we know that we are tendering against a couple of bank owned factoring companies who may well have renewal fees.

Whilst discussing renewal fees the factor told me that he had seen a quote from RBS Invoice Finance that included a termination fee. This wasn’t a fee in lieu of notice for an early termination but would have been payable on top of the balance of any minimum fees whenever the client decided that he no longer needed his facility.

It’s getting to be a bit of a minefield out there.

Posted under Factoring companies, RBS Invoice Finance