Factoring companies

It’s that time of the year again

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It’s Spring which means that the Business Money review of the various factoring and invoice discounting companies has been published.

For those that don’t read the magazine Business Money is a journal published mainly for the factoring industry in which various factoring companies tell each other how good they are.

The review takes two parts. First is a statistical section listing various stats supplied by each factoring company including such things as number of clients, which is quite interesting if the stats supplied by each factor are accurate and not massaged in any way.

The second part of the review is something that I find more contentious as it is a league table of excellence as voted for by 11 hand picked intermediaries.

These unnamed intermediaries included “one big four accountant with strong ABL links” “some major corporate recovery firms with a defined ABL capacity” and “some high volume invoice finance intermediaries”

Interestingly enough when discussing this review with my fellow independent specialist brokers I haven’t managed to find one single one who was invited to contribute and we all felt that it would have added credibility to the article if the reader was aware who had contributed to it.

The factoring companies were rated on the following three criteria:-

Management of the initial introduction

Management of the appraisal process through to completion

Management of the client when the deal has been completed

In view of the above criteria I was very surprised to find that the winner was Shawbrook Business Credit for a variety of reasons. Firstly they are hardly a mainstream ABL player completing just a handful of larger size deals every year. Secondly according to the stats that they submitted, their client numbers dropped from 229 in 2013 to 217 in 2014 yet they have taken top spot in a league table for managing new introductions.

As Robbie the Robot was fond of saying many years ago “Does not compute”

As if that wasn’t enough my own experience of dealing with them was completely the opposite although admittedly it was a couple of years ago when I was so annoyed by their lack of response to my telephone calls and emails trying to find out how my introduction was progressing that I vowed never to deal with them again and wrote up my experiences with them on this blog.

The rest of the top five included a factoring company that I refuse to deal with due to the many horror stories that I have heard in the past, one with a reputation for signing up anything and then chucking it out if they didn’t like it when they had already taken it on and another with very tough underwriting criteria who’s staff are leaving as they can’t get deals approved.

What I found more interesting were the factoring companies that didn’t do well in the survey including Bibby Financial Services who came out of it rather poorly as they were 16th out of 24 yet every year they win the prestigious NACFB award which is voted for by the 1,200 commercial finance broking members of NACFB as opposed to 11 unnamed intermediaries.

Even more surprising Calverton Finance which is a small factoring company that I hold in the very highest regard on all of the key performance indicators listed above, doesn’t even get a mention in the top 24

As most Factoring Blog readers will be aware I don’t hold the many awards dished out to factoring companies by the various organizations in high regard as most of them are a very poor reflection on real life with the very worst being the magazine that shortlisted a non existent factoring broker two years in succession and whilst people might think that awards are just a harmless bit of fun it does allow factoring companies to claim that they are award winners on their marketing material which could give unsuspecting prospects the wrong impression.

If I had to give any of the many awards some credibility it would have to be the NACFB awards due to the fact that they have 1,200 members eligible to vote, all of whom are in the commercial finance broking market.

As someone who has been in the factoring industry since before the dawn of time and for the last 15 years as a broker perhaps Factoring Solutions should hand out their own awards.

If they did, the criteria for an award would be rather different as the problem with two of the three criteria set down by Business Money ie “management of the initial introduction” and “management of the appraisal process through to completion” is that it isn’t the company that is responding but an individual within that company and the many individuals within the same company can all respond completely differently. I only deal with certain individuals at each of the factoring companies that I deal with as I know that they will respond well whereas some of their colleagues may not.

Apologies to Bob Lefroy for my original blog post which was perhaps unnecessarily acerbic 😀

 

 

Factoring and the recent bad publicity

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Most of the industry will be aware of the recent bad publicity that factoring has had in the quality press and of course many will be laughing at the discomfort being felt by one particular factoring company but whilst the so called revelations are obviously damaging to that factoring company the fallout out is also damaging to companies looking at factoring for reasons that may not be so obvious.

Two of the case histories used appear to portray the factoring company in a very poor light but most people in the industry will read between the lines and it was fairly obvious that one of the companies mentioned was pre-invoicing and whilst I’m not sure what the other one was up to there was obviously a major problem there if the company attended a meeting with the factoring company accompanied by a friendly insolvency practitioner.

What is annoying about the recent bad publicity is that there is one particular factoring company that I refuse to deal with as I have severe reservations about their ethics and I believe them to be a company that has profited more than others from the demise of their clients judging from the huge number of complaints that I have received about them. This is not the factoring company that has featured in these press stories

I have no doubt that the salesmen from this factoring company will have downloaded the press stories to their laptops and if they hear that a company that they are negotiating with is talking to the other company they will show them the articles in order to win the deal for themselves with the result that all of this adverse publicity will be helping the rogue factor get their claws into yet more unsuspecting companies.

There are industry practices that I am not happy with and would like to see curtailed and most of them centre round the early termination of factoring facilities whether through the insolvency of the client or through the desire of the client to change factors.

Many of the problems within the industry are actually driven by greedy and unscrupulous brokers who hold the factoring companies to ransom. Some of the insolvency practitioner owned outfits make it quite plain to the factors that if they don’t give them the lucrative insolvency work they won’t receive any leads from them whilst some of the very high profile broking firms insist on such high introductory fees that it makes it unprofitable for the factoring companies to take on their introductions which often leads to them looking at alternative ways to increase their profitability.

Perhaps ABFA could gather the factoring companies together and get them to all agree to a maximum commission level to be payable to introducers which might then result in brokers giving enquiries to the most appropriate factoring company and not the one that pays them the most.

Wishful thinking I know

ABFA – No not that one

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I guess that quite a few Factoring Blog readers will have come across Brian Moore and his Asset Based Finance Associates by now as he has been nibbling away on Twitter amongst other places for quite a while about his disquiet with the factoring industry and he is leading a campaign for it’s regulation.

I must admit that when I first came across him I had mixed feelings as I agreed with many of the points that he was making but not all of them and to be honest I think that his £5billion clawback tax is a bit silly even if I can understand his reasoning.

I have made my own feelings known in print and in private about the unhealthy relationship between certain factoring companies and the insolvency profession and the fact that putting a factoring client into Administration can be highly lucrative for the factoring company involved.

As perhaps the doyen of the factoring industry I have seen many changes since I first got involved some 45 years ago but it’s only in recent years that the independents have looked at other ways to supplement their income and decided that maximizing income from failed clients is one way to do it and the boss of one factoring company recently told me that one quarter of their profits come from termination fees

Mr Moore had the misfortune to be factoring with the company that possibly has the worst reputation for termination fees but it is a practice that is becoming more and more widespread and the spoils for both the factoring companies and the insolvency practitioners can be quite lucrative.

In recent years we have also seen a proliferation of insolvency practitioners setting up broking divisions in a mad scramble to introduce new clients to factoring companies in order to grab a slice of the lucrative insolvency work from the factors in return which is something I personally find to be disturbing.

If I had my way insolvency practitioners that had broking arms should be barred from taking on insolvency work from factoring companies as it could be said that there might be a conflict of interest or if preferred they could handle the insolvency work as long as they didn’t act as brokers to that factor.

In any event I think that most industry insiders are aware that not everything within the industry is rosy and privately they would agree that regulation of the industry is long overdue and necessary to cut down on some of the factoring company excesses.

For anyone wanting a closer look at the aims of Asset Based Finance Associates the website is www.abfa.co and my own take on regulation of the factoring industry is viewable by clicking the link.

 

Round and round in concentric circles

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I had rather a quirky (but substantial) deal put to me a few weeks ago and thought it would suit one particular factoring company that I’d never dealt with before but who keep inundating me with literature telling me how wonderful they are.

Having made contact with their local man I expected to be kept up to date with what was happening but it seems that this particular factoring company doesn’t believe in keeping introducers in the loop as it has been a real struggle ever since to find out what’s happening with emails ignored and telephone calls unanswered.

The last email that I sent asking for an update was at 9:00am two days ago but as with the last telephone message left, it’s unanswered.

Every factoring company admits that market conditions are tough at the moment but here we have one particular factor that won’t be receiving any more enquiries from me and the annoying thing is that they are not the only ones that treat their brokers so shabbily

Factoring – market shares

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Yet more factoring statistics have landed across my desk, this time with the client numbers and turnovers split down by individual factoring companies and interesting reading they make too.

I have only looked at pure factoring figures as I believe that the stats including invoice discounting are heavily skewed by the small number of extremely large companies that have been included.

In terms of client numbers the factoring subsidiaries of the big four banks have 66% of the total clients but Bibby Financial Services with just over 20% market share in terms of client numbers is way ahead of any other independent leaving the remaining couple of dozen other independents scrapping over a 14% share.