Government to get involved in invoice discounting ?

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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

Increase in the number of factoring brokers expected in 2009

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With factoring companies like Bank of Scotland having pulled up the shutters to new business and laid off their sales staff and others like GE Commercial Finance and GMAC just marking time the employment market is being inundated with factoring salesmen looking for jobs. Those few employment agencies that specialise in recruiting for factoring companies have more CVs on their files than ever before but unfortunately there aren’t any vacancies to fill.

The salesmen with proven track records will probably end up with one of the few vacancies that will be occuring in the near future whilst the rest will either leave the industry or try their hand at broking. I fully expect to see an upsurge in inexperienced factoring brokers this year and would suggest that anyone looking at factoring or invoice discounting should enquire a little more deeply than normal into the credentials of their chosen broker and perhaps even make sure that they are members of the Independent Factoring Brokers Association

 

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Cattles Invoice Finance

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When the board of Cattles announced to the world in September that their factoing subsidiary was up for sale they stated that they hoped to conclude a deal by the end of the year.

I don’t suppose that they factored in the worsening climate for finance companies and banks at the time and the end of the year has now come and gone with no sign of any imminent announcement regarding the sale.

Rumours regarding the interest shown by Bank Santander have now gone quiet whilst we hear that Hitachi who were the recent favourites have also lost interest.

We have to repeat the advice that we gave in September that until the future is clear we cannot recommend Cattles to any of our clients.

Ian

Factoring Solutions

GMAC stave off bankruptcy

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It was announced in the final week of 2008 that GMAC had won US approval to have banking status in a move that should help the company stave off bankruptcy. This is of interest to us as they are the parent company of GMAC Commercial Finance, a company that was once the market leader for factoring and invoice discounting in the UK but which seems to have lost it’s way since Lloyds TSB sold it in the late nineties.

GMAC Commercial Finance appear to have put up the shutters for new business some time ago but if the parent company have any cash left from the interest free loans they are providing to Americans to persuade them to buy GM cars, perhaps they might once again become active in the UK factoring and invoices discounting markets

Factoring facility limits being squeezed by independents now

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Most of the recent bad publicity about factoring and invoice discounting companies having their facility limits reduced concern the high street bank owned factoring companies as they revert to their banker’s mentality when the going gets tough but it isn’t just them that are restricting their clients’ funding as we had an enquiry from a client of an independent factoring company who was getting into financial problems because his factoring company wouldn’t increase his facility limit to allow him to grow.

The company is involved in the recruitment industry, has been trading for a year and is struggling to turn over £1m a year as their factoring company are restricting their facility limit to £100,000 and refusing to increase it. The company have been awarded further contracts to supply more staff in January but are on the verge of turning away the business as they can’t afford to fund it as the factoring company who claim in their marketing material that one of the advantages of factoring with them is “Flexible finance that grows as your business grows” are not living up to their pledge.

I won’t name the factoring company quite yet just in case there is more to the story than meets the eye (there often is) but we have arranged for one of the independents with a more commercial outlook to visit on Monday so I will report back on the outcome at a later date.