Factoring

NACFB dinner and awards 2011

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It was only a few months ago that I was at the Metropole Hotel near Birmingham for the Business Money dinner and last night I was back again, this time for the NACFB annual awards dinner.

There were a few similarities between the two dinners as the food was again naff, Bibby again won the factoring company of the year award and my name was again misspelled. However, unlike in June when the “comedian” had us all groaning the NACFB had spent a little more and Simon Evans had most of us in stitches.

I had to wait until this morning to see who else was there that I might have missed as NACFB in their infinite wisdom had printed the list of attendees in black on a dark blue background and judging by the number of people staring intently at the list I wasn’t the only one who couldn’t read it.

The evening was sponsored by Aldermore who had also been nominated for six of the first seven awards categories and it was somewhat embarrassing when they were overlooked for commercial mortgage provider of the year, lessor of the year, factoring company of the year, buy to let mortgage provider of the year and short term funder of the year but at long last their investment was rewarded when they won the specialist lender of the year category.

I’m intrigued to know what that covers though as it obviously doesn’t include commercial or buy to let mortgages, leasing, factoring or short term funding.

The grand prize draw had tickets to the Olympic rowing finals and signed Mancheter United shirts on offer but Aldermore got their own back with the bulk of the “winners” coming away with Aldermore Goody Bags and fixed smiles.

Once again many thanks to mine hosts for an entertaining evening.

Demand for Invoice Finance Grows

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Well it is according to a press release sent out to all and sundry by Simply Business. Apparently they are seeing “an increase in small businesses seeking alternative sources of credit such as invoice discounting and factoring as banks refuse to give credit.”

I wonder where they are placing this increase in business as all of the factoring companies that I have been talking to say that new business is flat at the moment whilst the broking community are all looking a bit glum too. Even the ABFA try and put a positive spin on figures that show a constant decline in numbers of SME businesses taking advantage of the various forms of invoice finance.

I have always taken the view that if I have nothing to say, I say nothing – perhaps that’s where I’m going wrong 🙂

Another misleading press release from the ABFA

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Another quarter has passed and right on cue the ABFA have released the latest statistics supplied by their factoring company members along with their usual misleading press release.

The ABFA claim that “UK and Irish firms are increasingly opting for this type of finance over other forms of lending” yet according to their own statistics 48,172 companies used factoring or invoice discounting at the end of 2008 – a figure which has fallen to 41,486 by 30th June 2011

They further claim that “The latest figures also show invoice finance clients are again choosing not to access all of the funds available to them. Total available funds this quarter were £22.2bn, with £6.5bn of finance available but not drawn.”

Nobody who I have spoken to believes that the majority of clients are “choosing not to access all of the funds available to them” but the truth is more likely to be that the figures are rendered completely meaningless by the 496 companies with annual turnovers in excess of £50m who represent 1.2% of clients by number but one third of factored turnover.

The reality is that as far as the SME sector is concerned the factoring companies are pedaling hard to stand still and have been for a few years since the start of the recession

Interesting factoring statistics from the ABFA

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The Asset Based Finance Association (ABFA) has recently released statistics relating to the factoring and invoice discounting market for the first quarter of 2011 which show some growth in the overall marketplace but it’s the accompanying press release that I find most interesting.

Firstly there is the claim that “Invoice finance clients are again choosing not to drawdown all the lending available to them, showing that clients have sufficient funds for their business needs. The total funding available was ÂŁ21.1bn yet only ÂŁ14.8bn was utilised by clients, meaning there were ÂŁ6.3bn of funds still available.”

I am picturing hundreds of factoring clients ringing up their client manager saying “No thanks I don’t need any money this week” I don’t suppose that the truth has anything to do with the many restrictions that the factoring companies impose to make sure that their clients never get anywhere near the notional funding limits.

The second claim that caught my eye was that “The average turnover of clients using invoice finance has increased from this time last year, even though total client numbers have dropped slightly following the recession. The average annual turnover per client a year ago was ÂŁ4.36m, whereas this has grown to ÂŁ5.27m in Q1 2011, a 21% growth in just a year.” A further statistic that wasn’t mentioned but has a huge bearing is that the number of clients with sales in excess of ÂŁ100m per annum has grown from 205 in the quarter ended 31st March 2010 to 220 in the same quarter this year and that extra 15 clients who’s combined turnover will presumably total at least ÂŁ1.5 billion will be enough to render the rest of the statistics completely meaningless.

Alastair Campbell would be justifiably proud of that press release 🙂

Factoring for recruitment companies

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We seem to be receiving an unusually high number of enquiries from recruitment companies who have been using the services of one particular high profile payroll and back office company complaining that they aren’t getting the expected levels of funding due to problems with credit limits.

This is understandable in a non recourse situation if the customers aren’t creditworthy but in the case of the latest one his customers are local authorities with the largest customer representing less than 20% of the total ledger.

Call me cynical but this is a classic symptom of a payroll company running out of money and squeezing it’s clients as a result and is one reason why I never recommend taking debtor funding from anyone other than a specialist factoring company.

One of the potential problems in dealing with many of these quasi factoring companies is that they obtain their own funding by “re-factoring” their clients’ invoices with their own factoring company and problems can and do happen when the factoring company restricts the funding due to matters that are nothing to do with their client but are possibly down to problems caused by another of their clients.

Anyone contemplating a payroll funding facility with one of these companies should do a company search with someone like Duedil and check to see if they have a debenture secured on their assets granted to a factoring company.

There are many factoring companies who offer factoring for recruitment companies including payroll and back office but again a word of caution is advised as many outsource the payroll function to a third party, normally without the knowledge of the client and whilst we have relationships with many factors we tend to only introduce our clients to one of the two or three factoring companies that actually handle the payroll themselves in house.

Any recruitment company looking for factoring with or without payroll should contact Factoring Solutions who are one of the longest established specialist brokers in the UK and only deal with those factoring companies that actually perform