Asset Based Finance Association

ABFA statistics part 3

by

As most industry insiders are aware a large number of independent factoring companies are funded by the big banks by means of back to back facilities. It occured to me that it’s possible that some of the 35 companies with annual turnovers in excess of £100m recorded in the quarterly statistics of the ABFA are actually the factoring companies that Lloyds TSB Commercial Finance and their ilk are funding.

If that is the case then all of the statistics are grossly inaccurate as many of the figures for the independents will have been included twice – once as the £100m+ funding from Lloyds TSB to the factoring company and again as the same funds are put out to the many clients of the factoring company.

I did ask some of the great and good of the factoring industry if they knew the answer but all said that whilst it was an interesting question they didn’t know.

Lies, damned lies, and ABFA statistics

by

The Asset Based Finance Association (ABFA) released their statistics earlier this month which summarised the factoring and invoice discounting activity of their members for 2008

 

The headline figures were that the number of active clients at the year end were down marginally to 48,152 whilst the advances outstanding at the year end rose by nearly 8% to £17billion and I guess that the initial reaction is that the figures are typical of what one might expect in the current economic climate with increasing pressure on companies cash flow resulting in higher funding levels overall.

 

The two interesting statistics that caught my eye were firstly that of the 48,152 clients using factoring and invoice discounting at the end of the year 248 of them had annual turnovers in excess of £100m

 

Advances to clients at the year end were £17 billion but a quarter of that sum was advanced to the 0.52% of clients with sales in excess of £100m and those figures skew the averages so much as to make them meaningless.

 

The other statistic that intrigued me was that the largest client sector in terms of annual sales was the zero to £500,000 sector with 18,500 clients which represented 39% of the total. The number of clients was virtually static compared to the end of 2007 but the advances outstanding to them at the year end was up from £542m to £908m which was a huge 40% rise

 

One would think that in the ordinary course of events that should be impossible. If we asssume that the average client has an advance rate of 80% and always has done – how could the overall average jump by 40%.

 

One possibility is that the figures include a large number of terminated accounts whose balances have been inflated by “extra fees” but the difference between 2008 and the previous year is £360m which is a hell of a lot of fees so I sincerely hope that is not the case.

 

If anyone has any other theories please feel free to post them here.

.

Government to get involved in invoice discounting ?

by

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

Summary of the Asset Based Finance Association (ABFA) meeting

by

One of my contacts told me that the highlight of the annual factoring jamboree currently being held in Barcelona was a lecture by a couple of Americans on mezzanine finance in which they appeared to have little grasp of what the subject was that they were lecturing on with each of them often contradicting the other when he had made a mistake in his presentation.

It would seem that the number of representatives from factoring companies was dwarfed by the huge delegation from the world of insolvency as they utilised the opportunity to try and butter up the factors all in one place

The factoring industry is closed this week

by

Not much will be happening this week at senior levels in the factoring and invoice discounting industry as the ABFA (the industry’s trade association) is having it’s annual jolly conference and all the great and good in the factoring industry will be attending.

Where else would the self styled “UK based trade association” be having their conference in these austere times but Barcelona 🙂

 

It should be an interesting conference as more than one member of the ABFA isn’t writing any new business at the moment but at least one member might usefully save some money by combining the conference with a trip to Bank Santander to discuss takeover terms in what is probably the worst kept secret in the factoring industry.