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

The long running saga of the sale of Cattles Invoice Finance has at last been announced with the purchasor being the private equity house AnaCap Financial Partners LLP who have been lurking in the wings for quite a while.

Whilst the announcement is now “old news” it did come when I was away sunning myself in Cyprus and whilst I thought about writing something for the blog at the time the amount of effort required to research and write something via Blackberry was too much like hard work.

Having belatedly read the press release dated 10th August I was interested to read the comment attributed to Doug Crawford that “The invoice finance industry is enjoying unprecedented growth in the current financial climate………”

The statistics for the factoring industry issued by the ABFA for the last couple of quarters show that far from enjoying “unprecedented growth” the industry has seen a drop in value of sales factored as well as the number of clients availing themselves of the services but I now await with great interest the figures for the quarter ended 30th June (which should be available shortly) to see the official confirmation of this growth.

Posted under Cattles Invoice Finance

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

Having a closer look at the ABFA statistics for the factoring and invoice discounting industry for the first quarter of 2009 I was struck by one seemingly insignificant statistic that the number of clients with annual sales in excess of £100m had dropped from 248 to 213

I wonder what happened to these 35 companies? Some may have shrunk to a stage where their turnover was less than £100m so came into a lower category but that is fairly unlikely. Some more may have ceased using their invoice discounting facilities replacing them with something else but again I think it unlikely which leaves the worrying fact that 35 companies turning over in excess of £100m each have gone bust in the first quarter of this year.

Assuming that each of those companies were turning over the bare minimum of £100m and their debts turned in the ABFA average of 59 days the total outstanding debts of these companies would be in the region of £650m and assuming an average investment of 70% there would be factors funds invested of £455m

Most of us who have been involved in the “collect out” of bust clients will know that there is often a shortfall in collections as the disputes start to crawl out of the woodwork and the clients customers go bust and there is a good likelihood that losses may be incurred in that situation.

I guess that due to the size of the facilities these will all be bank factors involved and I wonder what sort of losses will be involved when collecting out an investment of at least £455m from 35 bust clients. My guess is that some of the bank factoring companies will be sitting on potentially enormous losses at the moment

Posted under Factoring, Invoice discounting

The ABFA have recently published the factoring and invoice discounting statistics covering the first quarter of 2009. Whilst this shows a small decline in almost every area from numbers of clients to advances made it should come as no surprise in the present economic climate.

The number of clients at the end of March 2009 was down to 46,999 from 48,536 at the end of the previous quarter and whilst 2,260 new companies were welcomed to the world of factoring and invoice discounting 3,027 disappeared in the same period.  Assuming that the majority of the 3,027 went bust in one way or another it’s not surprising that insolvency practitioners are the factoring companies new best friends.

I wonder if Eric Cantona was thinking of the relationship between insolvency practitioners and factoring companies when he came out with his now legendary quote “ When seagulls follow the trawler it is because they think sardines will be thrown into the sea”

Posted under Factoring, Invoice discounting

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

According to an email just received from the Chief Executive of Bibby Factors one of their “rising sales stars” has just won a prestigious ABFA Students award for “measuring performance on the night”

The things that these students get up to

Posted under Bibby Factors

According to an article in the Financial Times yesterday the Government is supposedly looking at the possibilities of getting involved in invoice discounting in the hope of boosting the supply of credit and working capital to the hard hit SME sector.

It would seem that the favoured method would be for the Government to extend it’s guarantee facility to cover invoice discounting facilities from the major banks and apparently the Asset Based Finance Association (ABFA) have been involved in these discussions.

Banks have been shoving many of their customers down the factoring and invoice discounting route for several years as not only are the rewards higher but the security is better as invoice discounting is fully secured by the invoices that are being funded and a properly managed invoice discounting company shouldn’t need a Government guarantee to enable them to offer funding facilities.

If this turns out to be true it will be an unusual step by the ABFA to lobby for guarantees that will only be of use to some of their members but which will give them a huge advantage over the others.

Watch this space

Posted under Factoring, Invoice discounting

One of my contacts told me that the highlight of the annual factoring jamboree currently being held in Barcelona was a lecture by a couple of Americans on mezzanine finance in which they appeared to have little grasp of what the subject was that they were lecturing on with each of them often contradicting the other when he had made a mistake in his presentation.

It would seem that the number of representatives from factoring companies was dwarfed by the huge delegation from the world of insolvency as they utilised the opportunity to try and butter up the factors all in one place

Posted under Factoring companies

Not much will be happening this week at senior levels in the factoring and invoice discounting industry as the ABFA (the industry’s trade association) is having it’s annual jolly conference and all the great and good in the factoring industry will be attending.

Where else would the self styled “UK based trade association” be having their conference in these austere times but Barcelona

It should be an interesting conference as more than one member of the ABFA isn’t writing any new business at the moment but at least one member might usefully save some money by combining the conference with a trip to Bank Santander to discuss takeover terms in what is probably the worst kept secret in the factoring industry.

Posted under Factoring, Invoice discounting