ABFA

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.

 

ABFA statistics for factoring and invoice discounting in 2011

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This week saw the release of statistics for the factoring and invoice discounting markets for the final quarter of 2011 which meant that the picture for the whole of the year is now available.

It would seem that yet again the factoring companies made no overall progress with the number of companies using factoring and invoice discounting facilities hardly moving at all although the funding provided to them increased overall.

The most worrying figure though was the fact that the overall net gain of 408 clients was achieved by taking on 11,121 new clients and losing 10,713 clients in the same period.

The 10,713 clients lost in the period equates to one quarter of the total client portfolio at the end of the previous year and that is a truly worrying statistic.

Two figures that I would like to see revealed are the amount of fees levied overall to failed clients as termination fees and the amounts received by insolvency practitioners from failed factoring and invoice discounting clients as I have a sneaking suspicion that the amounts would be quite shocking

A representative of ABFA obviously struggling for something positive to write stated that “The new figures show that increasingly larger firms are choosing invoice finance because of both its inherent strengths and its availability. The overall figures are a strong endorsement of invoice finance and show that it continues to grow in popularity, not the least because firms which use it are able to grow and increase their turnover.”

I think that one of the main reasons why larger firms are choosing invoice finance is because their bankers are giving them no other opportunity as the banks’s own security position is much better with invoice finance rather than the traditional overdraft and I’m not sure that losing one quarter of clients and just about managing to replace them constitutes a growth in popularity either.

The Small Business Finance Directory

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Small Business Finance Directory has been launched in an orgy of self promotion with almost every online magazine carrying stories about this joint venture between National Association of Commercial Finance Brokers (NACFB) and Finance and Leasing Association (FLA) and the Asset Based Finance Association (ABFA)

It is supposedly “a brand new tool aimed at promoting access to vital funding” and it’s brief is to “help around 60,000 businesses find suitable commercial finance in its first year”

Having had a look at the directory it seems to be little more than a listing of all members of the three organizations with one or two non members added for good measure. Certainly in my own field most of the major factoring brokers that don’t happen to be members of NACFB aren’t listed and far from being designed to help business access suitable funding it seems designed more to make sure that they only find suitable funding via Association members.

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 🙂

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