Factoring

ABFA Code of Conduct

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I have been one of the most outspoken of critics of the ABFA in the past for it’s perceived unwillingness to police it’s members but following a coffee with Kate Sharp the CEO of the ABFA recently I have been converted to the light.

The Code of Conduct will never be all things to all men but it’s certainly a good start with the real movement forward coming from the establishment of a Professional Standards Council for the factoring industry plus the appointment of the Ombudsman Service to provide it’s services for dispute resolution.

The Professional Standards Committee will not just be factoring industry insiders but will include a number of external heavyweights as well and it’s their job to ensure that high standards are set and maintained.

I was quoted recently by a national newspaper as saying that “those [lenders] that like to skate on thin ice will continue to do so knowing that ABFA have no teeth or the will to grow any.”

Kate assured me that there is a rather large set of canines growing rather nicely at the moment and the ABFA will use them if necessary to either nibble or bite hard on any of their members that might be considered to be bringing the industry into disrepute.

Having been publically critical I’m happy now to withdraw my reservations and give the ABFA the opportunity to put it’s plans into operation in the hope that it goes a long way towards obviating the need for regulation

factoring client in Administration today

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One of my largest clients will be going into Administration this afternoon. The company has had problems for a while and the factoring company have been desperate to help but the company’s directors have been uncommunicative. It now transpires that there is a newco lurking in the background and the factors have discovered that many of the invoices that they have funded have also been issued on newco too.

It was a tricky facility at the best of times due to the nature of the product and the factoring company feel that there is now a huge possibility that they won’t recover their investment. It’s a shame that The Telegraph aren’t interested in stories like this as client fraud is far more prevalent than many people realise but unfortunately it isn’t sensational enough.

Factoring Solutions – the year so far

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We are now one third of the way through the year and it’s been an interesting period. Enquiries were down 25% on the same period last year but interestingly enough one third of this year’s enquiries have been for spot factoring whereas in the same four months of 2012 we didn’t receive one single enquiry for single invoice factoring.

In common with most other brokers and factoring companies the conversion rate is worse than it has ever been with far fewer companies actually signing up despite having been given pretty decent offers. Everyone has their own theories but I believe that it’s just a general lack of confidence in the economy and a wish not to take on any further commitments until the economic outlook is a little brighter.

Historically we have handled a large number of new start recruitment companies and I knew that whenever the phone rang at five minutes past one that it was yet another recruiter sneaking out in his lunch break to discuss the financing of his own operation but I have been able to eat my own lunch in peace recently as recruiters aren’t willing to strike out on their own at the moment.

Lowlights of the year included two separate healthcare companies who were unhappy with the incumbent factoring companies and wanted recommendations of factoring companies with higher service levels who then subsequently refused to speak to either of the companies that we introduced or to return their phone calls either. A company search revealed that the first company had a debenture registered to Lloyds TSB Commercial Finance one week after speaking to ourselves and the second registered a debenture to the same factoring company two months after speaking to us.

Whatever reason these two companies had for not wanting to talk to the factoring companies that we introduced them to they could have had the courtesy to pick up the phone and say “no thank you” rather than just hiding. I often feel that people like this are perhaps not best suited to running a company and these two weren’t alone either.

We then had an enquiry from a company spitting feathers at the mere mention of their existing factor claiming that the service was terrible, the account manager never returned calls and they charged for everything in sight including speaking to their account manager and they were desperate to get out of their clutches

Discreet enquiries with an insider at this particular factoring company confirmed that in his opinion all of the complaints were justified so we introduced them to a competitor who was unable to progress the case as the prospect complained that moving wouldn’t save them any money.

Factoring and invoice discounting to be included in the Funding for Lending Scheme (FLS)

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Factoring and invoice discounting companies are to be included in the Bank’s flagship Funding for Lending Scheme (FLS), which is also expected to be extended by a year to 2015.

Invoice finance is the lifeblood of many small and medium sized companies as it is the main alternative to bank borrowings in providing cash flow for working capital, by allowing them to borrow against invoices.

The Chancellor is hoping the new arrangements will boost confidence and investment in a sector that accounts for 14m jobs – almost half of private sector employment – but has been starved of capital although I must admit that I’m not sure as whilst the Banks seem to have been loathe to lend, the factoring companies have been falling over each other to push money out of the door but companies have been loathe to sign up despite rates being at a historic low level.

The latest invoice finance awards winners, you couldn’t make it up

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That was the tweet from a friend and fellow factoring broker that alerted me to the fact that silly season was well and truly upon us in the form of the Business Moneyfacts awards following hard on the heels of yesterday’s offering.

The category that interested me most was the “Asset Based Finance Broker of the Year” award, as if one thinks about it logically who would vote in that category.

1) No factoring broker would vote for a competitor.

2) The companies that passed through the broker’s hands wouldn’t normally vote as they wouldn’t be likely subscribers to Business Moneyfacts.

3) The factoring companies would have a rough idea of who should perhaps be a suitable “Asset Based Finance Broker of the Year” but there is probably only a dozen factoring companies who would bother to vote anyway.

Who does that leave to vote – well I’m sure you can work that one out ?

I’m equally sure that it’s completely co-incidental that two of the three listed asset finance brokers are associated with insolvency practitioners who are themselves “finalists” in the insolvency section. 🙂

The industry insiders are well aware of what a farce these awards ceremonies are but the problem is that the winners then stick a logo on their websites and other marketing material stating that they are “Winners of ABC Awards 2013” which will give them implied credibility in the eyes of the general public which in many cases is not warranted.

As an experiment I think that I will register Lovely Jubbly Invoice Finance and ask all of my contacts to vote for it next year