Factoring

Non recourse factoring issues with bank owned factoring company

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Chatting to a friend in the independent factoring sector he told me that he had been approached by a client of a major high street bank owned factoring company as they had suffered a reasonably significant bad debt which was covered by the bank under their non recourse factoring facility limits and as a result the factoring company suddenly decided to reduce the credit limits on their rest of their customers with a resultant reduction in available funding.

As the client was struggling to operate on the new reduced funding levels the obvious next step was to transfer to a more flexible factoring company but they were told in no uncertain terms that if they did they wouldn’t pay out on the bad debt.

It would seem that this same well known name also claims that if any of their clients becomes insolvent and enters into a CVA or Administration, that also invalidates any bad debts that are still in the system.

To my mind this is highly unethical as I’m sure the same people that thought that one up would be the first to complain if they had a motor insurance claim and the insurers said that they wouldn’t honour it if they transferred to a new insurance company on renewal date.

Factoring and invoice discounting review of 2011

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I guess that it’s been pretty much the sort of year that we all expected, with the factoring industry as a whole pedalling hard just to stand still.

According to the ABFA statistics the total number of companies using factoring and invoice discounting at the end of September was 41,572 which was a net increase of 61 since 1st January.

Interestingly the factoring industry took on 8,000 new clients in the period but lost a similar amount. It’s normal that quite a few of the new factoring clients are phoenix’s of existing clients but my understanding is that less and less companies have risen from the ashes this year.

Stats for the final quarter of the year won’t be out for a few months yet but chatting to other brokers as well as factoring companies it seems that the final quarter has been even more of a struggle with enquiries down and companies taking longer and longer to decide what they want to do anyway.

Over at Factoring Solutions we aren’t bucking the trend with our enquiry levels down on last year but oddly enough we have had quite a good year as the quality of enquiry has been higher and we are getting a higher proportion of deals away even if the lead time is getting longer and longer. In November two different factoring companies both paid away decent deals that first arrived on the scene 18 months ago before prevaricating like mad for a year and a half and finally signing on the dotted line when we had all but given up on them.

I am frequently asked why I haven’t blogged as much this year and the honest answer is that there has been very little to blog about. No factoring companies have gone bust, no new ones have started up and there isn’t much tittle tattle to write about. I notice that a few of my broking competitors have now started to blog but with the best will in the world their efforts seem to be designed to try and boost Google rankings rather than to be read by human beings as the articles seem to be the same “what is factoring” article rehashed every month whereas this blog is actually designed to be read by factoring people and I won’t post just for the sake of it.

There are one of two stories that I have deliberately not run with as most industry insiders already know about them whilst I can’t see it being in the public interest to bring them to a wider audience and to those readers who email me complaining that I haven’t published their responses I would remind you that this is a personal blog and not a forum.

There is just the one rumour lingering that has been around for the best part of the year concerning the supposed take-over of one particular factoring company and I have been told in the strictest of confidence from several sources that the buyer is – a different company each time 🙂

Get your factoring facility now before it snows

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According to a press release from Close Invoice Finance a recent survey that they have conducted reported that a number of companies in the West Midlands admitted to being ill-prepared for the disruption that a bad winter will bring.

The local head of Close stated that “If businesses aren’t prepared for the worst, it can have a serious effect on cashflow which everyone knows is the lifeblood of all businesses.

“The key for getting through one of the worst winters we’ve seen for years is preparation. Failing to plan could have a serious impact on your business and result in it being unable to trade.”

He went on to state that his “advice to businesses would be to have in place suitable funding arrangements to ride out any potential cashflow problems associated with the weather. Invoice finance is one option. It enables businesses to access cash immediately, easing any financial pressure and allowing companies to get on with what they do best – running their business.”

So now we know, if it looks like it’s going to snow, contact your friendly factoring broker and get your factoring facility in place before it has time to settle.

ABFA statistics for the third quarter of 2011 released today

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As usual there are a great deal of statistics that actually say very little as the 251 clients with annual turnovers in excess of £100m per annum obscure the wood quite well.

The overall number of companies using either factoring or invoice discounting has grown by the magnificent sum of 61 since the beginning of the year to 41,572 but lending to those companies has increased by £1 billion in the same period to £16 billion. Interestingly 62% of that increase in funding has come from the £10m to £50m turnover sector and 29% of the increase in the £50m to £100m turnover band.

Whilst total facility limits are shown as well as the total of advances made there is no analysis of how this is split into turnover bands and my guess is that rather than SME’s not taking their full available funding as ABFA like to claim it is actually a few of the £100m turnoevr companies that are skewing the statistics