Train driver “shortage”. What does this tell us?

Perhaps inspired by Casey Jones (above), many boys of my age dreamt of being a train driver when they grew up. Admittedly todays electrical units are not as romantic as the steam trains of old but its still a career that surely must be appealing to many people on a variety of levels

We are all frustratingly aware that the trade is heavily unionised but that does also mean that drivers conditions are very favourable with relatively high wages and levels of leave. Yes the hours can be unsocial but the job security is copper bottomed.

So why on earth is their a shortage of drivers and worse still, why has its proved to be necessary to drop the starting age to attract new recruits?

Are we in a society where those of a certain age simply won’t consider certain roles regardless of the financial rewards? And what does that say about the economy and job market?

This reminded me of the political discourse from the extremes. I recall a far left MP compiling that the jobs and careers on offer to those on her estates in Hackney were “the wrong types of work” and of course the relentless simple minded message from the likes of Reform is that immigrants are “stealing our jobs”. Both are clearly wrong

This is certainly something of a head scratcher

Which invoice financier has the best online package and which has the worst?

One area which distinguishes certain lenders from others is the quality of their customer interface. Certain clients will view this with varying degrees of importance but in my experience, it’s never a factor to be completely dismissed.

Firstly the responsiveness of the telephone interaction is vital, given that invoice financing is an ever evolving facility and here some lenders have varying degrees of responsiveness. I will discuss that in a future post but the other interfacing factor that cleaves one lender from another is the online package.

There have been some significant developments in this area during the past 15 years (which is the extent of my time brokering) with many lenders offering systems which provide services such as automatic bank reconciliations. That is a considerable time saver for many SMEs as well as putting to bed a pretty humdrum unexciting task. Clarity of transactional record keeping and analysis as well as provision of useful reports are also factors.

Not naturally being systems orientated myself, I have been struck at how often this is a important element of my clients feedback which is noted by myself for future discussions with new clients

This being the case, you would think that all would be devoting resources to ensure that they remain ahead of the pack. Not true

So who is leading the way and who are the stragglers?

Unfortunately, i’m not going to name names. This is of course privileged information and there is also the risk of a significant backlash but its far to say that the medium sized independent lenders tend to provide the most ‘up to date’ user friendly interfaces with one lender in particular perhaps ahead of the pack at the present time. A lender with a long established reputation as well as a strong record of client retention

At the other end of the scale, a major institution which is aggressive on pricing and appetite has been using a system which looked horribly out of date when I first entered this field 15 years ago. Im not entirely sure whether they are still rolling out this museum piece to new clients or not but if so, I can imagine the horror. Its striking, because as a lender they have much to offer but why haven’t they ensured that they maximise their potential? Astute observers will possibly identify the lenders i’m referring to in both cases.

Invoice financing is possibly the most complex and therefore interesting form of business lending. Its a long term close relationship between provider and client and consequently he quality of communication and the systems provided is paramount

LCF. Auditors and the FCA seemingly cant spot a Ponzi

To make matters worse, the auditors were (once again) big four firms and the FCA was being overseen by Andrew Bailey, now the head of the Bank of England. The FCA who seemingly couldn’t question why a “investment firm” was guaranteeing 8% returns when interest rates were 0.25%

Its always 7 or 8% too. Doesn’t it occur to these people that such returns in such a market are impossible to guarantee and hasn’t it piqued their attention that its always pitched at this rate?

And why this rate? To me its simple. Its not high enough to raise enough suspicion with the gullible but certainly might enough to appear to give a very decent return

The investors deserve some sympathy but that can be tempered by the fact that (yet again) they ignored the truism that if it looks too good to be true, then it almost certainly is. However their ire should be directed at the brokers who directed them to this vehicle who themselves should have been aware of the risks.

Actually I will rephrase that. Ire directed at “brokers” who were well aware that this was a virtual Ponzi.

In my circles these schemes rear their ugly heads regularly. A few years ago I was stunned to find a fairly well respected IFA knew well promoting just such a scheme (Cayman Islands guaranteed 8%) and I have also been approached directly myself. Im not interested

This will be interesting to follow but it’s certainly not the only pending case out there, as many in my circle know too well

Border Checks. The post Brexit world now hitting home?

I would generally hesitate to link to the Guardian on any subject surrounding Brexit but this piece gives a balanced clear assessment of the current status of EU border controls for “perishable” goods

The key issue here is that the imposition of border checks into the uk are about to commence. The impact and cost to major importers is probably not significant. There will be a marginal cost to consumers but for SMEs the whole issue is going to hit a lot harder

The cost is not just in financial terms but also, of course, the tiresome business of paperwork. The justification from government ministers had been given as protection from various viruses and infections which supposedly occur within the EU. Fine but does anyone recall this as an issue during the proceeding fifty years?

There is of course an element of tit for tat and our exporters are having too live with fussy border checks (there were initially some seriously petty examples) and maybe turning the table will encourage a review of the whole process?

A process which to my mind is pointless and faintly ridiculous. If the “checks” haven’t thrown up any serious issues for decades, then why are they required now? Just to make political points (from both sides) about Brexit?

For SMEs the costs are not pretty and you wonder why the government really believe these are necessary. Perhaps they should be gearing the costing structure towards larger transactions only and aiming to support small businesses. Isn’t that what the Conservative party was once about?

There is of course the “protectionist” argument whereby uk farmers and food producers are shielded from EU “competition” but the loser in such instances is the consumer of course. From a personal point of view, I want to see as much choice as possible (especially having tasted superb French bred chickens within the last week)

There will of course be the screeching from those who scream about any positive contact with the EU and also those who are determined to prove that Brexit is one big historical mistake (one “historian” has called it the biggest “tragedy” for Britain within the last 2000 years. More so that two world wars, the plague, the black death and so on…).

We are where we are. We do not need to squabble with our neighbours and we should build a mature relationship. In fairness too Sunak and Hunt there have been significant efforts to do so (near enough impossible under their three predecessors) and under the next administration we should expect the same but whoever is responsible needs to get the heads banging together to bring an end to this administrative anti trade and business nonsense

Baffling John Barnes

Many of us of a certain generation will remember John Barnes as a seriously talented footballer. In addition, he has always been pretty articulate and seemingly a lot brighter than most footballers (admittedly a low bar) as well as coming from a very solid and affluent background

Which makes his disastrous personal finances even more baffling. In addition to the latest penalties (and I am resisting the line that he was always a good “penalty taker”), I appear to recall that he’s been declared bankrupt at least once before

I also recall a quote that he simply “didn’t care about money” but surely there comes a point…

I believe it’s better to care a little less about money than too much but surely such a recklessly cavalier approach is going to result in considerable personal stress?

I also believe that some people are a little addicted to personal danger and I personally know someone who has recklessly stretched themselves in too many directions and simply got involved in areas that any sensible person would have avoided. And its collapsing all around him

The motivation for doing so or simply not caring are unclear but this brings up the ever present truism that credit is about people as much as it is about numbers. There can be little clues in the engagement and the questions answered or avoided, which can be very significant as either a positive or a negative

Thats why when lenders seek to engage on a long term relationship, they insist upon meeting the clients and rightly so.

The lesson from Liz Truss. Why lenders require respect

Daniel Finklestein is one of the very best columnists in the national press. His most recent column (behind a paywall), cuttingly takes apart Liz Truss’s somewhat desperate claims from her very brief time in Downing Street. One paragraph in particular stood out for me (which also refers to the far left within Labour in the 70s and as proves that as ever, the similarities between extremists are more pronounced than the differences)

“It didn’t help that Truss had refused to seek a proper OBR review of her plans and so investors were reliant on a leak to the newspapers, reducing confidence even further.”It didn’t help that Truss had refused to seek a proper OBR review of her plans and so investors were reliant on a leak to the newspapers, reducing confidence even further.

When one borrows money it is absurd to complain about the lenders’ fear that they may not get their money back and to suggest that they are too stupid to understand forecasts. Yet this is the essence of the complaint of both the Bennites and the Trussites”

and…

“There are five points worth making about the idea of abolishing the OBR. The first seems entirely obvious. Forecasts are necessary. In order to budget sensibly and organise the public finances a view has to be taken about what the future might look like. Literally nobody does anything without making a forecast. When you open your front door and take a step out of it, it is based on a forecast of what will happen when you put one foot in front of the other”

It’s hard to argue with this and of course this applies on a micro level as well as on the macro level

Truss believed she could attract lenders without any verified plan. This is simply typical of the lunacy of naive idealists and the key here is the word “verified”. She believed that her rhetoric and idealism is enough to convince lenders

Wrong

Of course, just as in the world of SME lending, there will be complaints that lenders are being too cautious and frequently that complaint is justified but it doesn’t negate the fact that the it’s the lenders who hold the cash. They are the ones taking the risk.

Truss’s proposed solution was to abolish the OBR which is akin to a FTSE 100 company seeking to raise finance without an independent audit, let alone a forecast. On a smaller level I have seen too many proposals to buy businesses (MBIs) where there has been virtually no preparation at all. I couldn’t countenance wasting a lenders time on a prospect who simply shouldn’t be allowed to run a business, let alone purchase one.

And that brings us back to Truss.

Certainly she was the least qualified holder of the office in living memory and you can almost feel sorry for someone who cuts such a comical and delusional figure but business is business.

I will challenge lenders every step of the way. Its my role but also I need to have a degree of confidence in my client. Sadly that can be lacking and as with Truss, a loss of faith can end up with only one result

Why even “satisfied” County Court Judgements are damaging.

There is an assumption that once a CCJ has been “satisfied” then thats the end of the matter and it will disappear from records. Not true

Two conversations during the last week have illustrated this point and why it’s essential to be taking good advice rather than jumping to conclusions.

Firstly i’ve been referred to a client who is under heavy pressure from a business lender who appear to be determined to impose a County Court Judgment rather than negotiate a means of settlement. Unnecessary and I do know that word is getting around that this is a lender to avoid but the key here is that the client has rightly taken the view that coming to an arrangement and avoiding a CCJ is vital for his future.

Secondly is a contact who has fought a lender over a sum due where frankly there was no prospect of anything other than defeat. Costs would have been incurred and rather than come to a sensible arrangement, a CCJ (for a substantial amount) had been recorded. This has now been “satisfied” with full settlement but is that the end of the issue?

No.

CCJs, even when satisfied, remain on record for six years. Of course the counter argument is that being satisfied they are irrelevant but nothing could be further from the truth. Lenders know that this is a record of someone who fought to extrapolate themselves from a legal commitment and lost.

What does that mean?

No credit. Simply put, no lender will touch such a prospect and frankly who can blame them?

• A footnote to this would be that the value of the CCJ is relevant. Small items can be overlooked but anything that runs into the thousands will certainly be overlooked

Business Loans or Invoice financing?

A question many businesses face and one that I frequently advise on. Many readers will know the pros and cons of both options and of course there is a marked difference between the strict term lending of the Loan and the revolving facility of invoice financing. My role is to always determine the best option for the client.

This can come down to a number of factors but the biggest issue I tend to face is preconceived notions. Simply put, many businesses view loans in a more favourable light than Invoice financing. In these cases, Invoice financing is often described by the somewhat derogatory “factoring” and is often followed by tales of cynical practice by certain lenders.

Of course the lenders will claim that “we are not like that now” but the damage has been done. Ive had perfect leads for invoice financing where the business owner would at any cost take out any lending but. I perfectly understand that. Business owners have a tendency not to entirely believe the word of “bankers”.

When its a straight choice between the two options there are certain elements that have to be considered away from the nature and flexibility of the facilities

Firstly business loans are hard to obtain and for SMEs the major banks have all but washed their hands of them. That is an area that maybe needs addressing by a future administration but for now the business lending market is more or less confined to independent specialists. The problem here is that the rates can be horrific (i’ve seen 5% a month on a £250k loan) and the security demands quite intensive

Some of these lenders have nice easy to access websites with lots of smiley emojis and staff who sound young and keen to help. The direct service can be decent but problems can lurk

Invoice financing tends to be promoted by rather more experienced staff and lenders and there is a greater emphasis on getting to know the client and building a relationship. The downside can be the administration of setting up a facility (although there is a newish entrant on the market that has found a way around the worst aspects) but generally, with the assistance of decent broker, it will usually be a cheaper option.

Not much between the two choices perhaps but there is another element which is often not considered because its something that any business owner naturally doesn’t wish to think about. Its security

With invoice financing then security is with the invoices. Yes personal guarantees are often demanded (although only for a fraction of the lend) and I will fight against these, knowing that certain lenders are happy to waive that demand. The reasons given for the PGs by lenders are dated and quite laughable but in truth the fact that the lend is against less than 100% of the assigned invoice value will mean that the lender will invariably collect the liability without having to trouble the borrower. There is a degree of comfort

No such comfort with business loans. Personal Guarantees are likely to be for the full value of the lend and of course, in the event of default that means the business owner is totally liable. The problem here is how the lender reacts. I know some that are open to negotiation but at the same time I’m directly aware of very hard lines taken by a at least one lender using the aforementioned smiley emojis. In fact the line they appear have been taking is nasty and counter productive.

No one likes to think of worst case scenarios but it say role to explain the possible exposures and also to give guidance on the future options

Did you know that a business can be wound up “in the public interest” ?

You learn something every day…

“The process by which a company is wound up in the public interest rather than because it is insolvent.

A petition for a company to be wound up in the public interest may be presented by the Secretary of State if he considers that it would be expedient in the public interest for the company to be wound up. The applicable test for the court is whether it would be just and equitable to wind up the company. Such an order results in a compulsory winding up and is usually made on the basis that the company is being run in an unsuitable or objectionable manner.”

Im sure that many readers were aware of this and perhaps its logical where the enterprise is clearly a criminal enterprise but the this has been enacted in areas where there the business’s trading has clearly been surrounded by a whiff of fraud

This is a particular example in the ever murky world of diamond trading.

“iGL, a company based near Hatton Garden in London, provided certificates to Diffraction, a company based at Jumeirah Lake Towers in Dubai, United Arab Emirates, that was at the centre of a scheme to sell fancy coloured diamonds to investors, via numerous broker companies based in the United Kingdom

Diffraction provided an online trading platform to numerous UK-based broker companies who sold the diamonds to members of the public at mark ups so high that investors were unlikely to obtain any return on their investment . The company also offered and controlled the storage of investor’s diamonds in a storage fault in Dubai”.

It could be argued that this was a case of caveat emptor and “investors” daft enough to dabble in this particular market expecting instant high returns deserve what they get (readers of this blog will of course be aware of a previous recent example) but HMG has taken a differing view and in truth, there can be few complaints

Do HMRC and the Government care about the self employed?

When initially considering self employment I was greatly inspired by the Businesslike events proposed and sponsored by Gordon Browns administration. I often believe if it wasn’t for a couple of excellent presentations, I might not have taken the course I did . I certainly have no regrets. Far from it

Businesslink had its faults for sure but the intent was clear. Labour under Brown and Blair, sent a clear message that they supported small enterprises

Setting up a business is daunting and perhaps the least enjoyable aspect is managing tax. After years of PAYE, filling out detailed returns can be quite a shock and not all the self employed are natural financially minded or adept at form filling.

The self assessment is not too difficult to complete and made a couple of brief calls in the past but my situation isn’t complicated. I would also state that the helpline was excellent so why has HMRC taken this step?

Quite incredible that they are shutting the helpline for a full six months of the year and expecting enquirers to reply on “chatbots” which are even more frustrating than call centres from a certain part of the world.

And for tax too. This isn’t about returning an unwanted parcel to Amazon (who actually do have excellent customer service) but about the largest financial transaction most people will make in any one year.

Whether the decisions was driven by HMG or just HMRC independently doesn’t perhaps matter but the supposed party of enterprise should perhaps consider the needs of those it claims to represent