Is this right? “Firms fined most by regulators still on UK government’s list of top suppliers”

Tucked away in Sundays Observer is a very relevant and somewhat startling story It asks the above question and my view is that it is an emphatic “No”

HMG should be leading the way in clamping down on bad practice. Fines issued clearly only go so far so the logical step is that the businesses listed are removed from approved suppliers lists. Indefinitely would be my suggested time frame. Hit them where it hurts

Why is this of concern? It is because a number of these businesses conspired to con lenders, be they secured or (especially) unsecured. Thats simple fraud in my book and should not be treated lightly

Of course, being who they are, they would endeavour to find methods around such a ban but challenging that wouldn’t be insurmountable

Fines were not only issued to auditors and suppliers such as BAE present a separate issue being that the goods/service they supply may not have easily available alternatives but professional services are a very different matter although a cynic might say that finding a clean audit firm amongst the top 50 could prove a challenge in itself

Dangerous Business Brokers

Knowing a couple of very decent Business Brokers (yes they do exist), I really do wonder how much they despair at the dismal behaviour of the majority of their competitors, including, it must be said, perhaps the biggest player in the market

The latest take gets me thinking what many others may well have thought before. This is simply not about serving the client but about ripping as many fees as possible from all parties. Why would this be preferable to completing a sale with the attendant commission? It certainly shouldn’t be but its considerably less work

My client has been seeking opportunities in the haulage sector. Thats a pretty mature market as we all know and margins are tight. Fortunately my client is experienced and smart enough to know his way around so he’s been somewhat surprised to find that a Business Broker has priced a prospect up at nine multiples of EBITDA plus the net value of the assets

Nine..

To turn it around and ask who on earth is going to commit to buying a business whereby there is not likely to be any net return for nearly 10 years deserves an answer. Apparently the Broker becomes very aggressive at this question and the seller has now decided to have nothing to do with their “services”

So why do this?

It’s about winning the client and the upfront fees as well as the venal exclusivity clause in these agreements

Sellers heads are turned by high valuations even if they have no chance of success. The broker pockets thousands for the initial fee and then isn’t committed to do very much at all. If the business sells to any party for any price within the “exclusivity” period (usually three years) then they are entitled to their commission

There is of course fault on the sellers part involved here too but this whole sector needs a shake up.

And soon

Do we need EU workers? Of course we do

This blog attempts to avoid politics but on occasions government policy overlaps into the concerns of SMEs to such an extent that it simply cannot be avoided. The latest issue is migration

Its probably best that I will refrain from saying what I think of Suella Braverman but her suggestion that businesses can simply “train up” required workers to fill gaps is naive and simplistic in the extreme.

SMEs do not have the time and resources to train reluctant staff dragged in to fill roles for which they have no real aptitude or enthusiasm. Some will say that’s the SMEs problem (so much for the party of business) but the more likely outcome is that the SME will weigh up the costs and required resources and exit that sector of the market

Extreme? Not at all. I have just dealt with that precise example for ten third time. A high end quality fashionable furniture company to the east of London ( run by first class excellent owners), has closed a section of their offering because they simply cannot find the staff to match the quality of the eastern European employees that they had been employing before

The “party of business” seems more inclined to simply appeal to retired bitter golf club racists than actually make the economy work. The rest of us have moved on

Clueless underwriting (part 1)

This could be a very long series..

I heard the latest example from a representative who works for a very decent lender with whom I have a number off contented clients. This example wasn’t my client but the response to this prospect was ridiculous

Heavy demands on guarantees were demanded from the client because the lender had recently had a bad debt in the “same sector”

What sort of logic is that? Ok I can just about perhaps understand the response in construction (which this lender doesn’t fund) where there can be a domino effect and the sector fluctuates wildly but even then it would be unprofessional not to treat each individually

I’ll go back too my credit management days and state quite clearly that if rejected a new client on the basis of “same sector” I would be rightly fired on the spot. Why is this rubbish accepted within asset financing?

Still confused? Well let’s say that sector was IT and the new client was Apple?

Clients have to be treated individually. Why can’t the bosses at the invoice finance providers (some of who I hope are reading this) get a grip with this?

What’s next? An underwriter rejecting a prospect because their name begins with the letter B because another of another client who’s title also started with the letter B

Its about the same relevance

Can stupid invoicing lose a client?

The simple answer is yes and here’s why

A client of mine has appointed a new CEO. My client is in good financial shape and does not at present use financing but they have some large corporate clients who are sluggish payers. Nothing new there of course

Most of their work is short term projects which have to be completed at various stages before payments are made. Nothing unusual about that

My client was frustrated with one particular client who habitually paid 120 days rather than 30 and the CEO thought he had a solution

He would bill the whole project upfront without any prior agreement with their client. And then demand payment

Naturally enough the cash conscious corporation receives the invoice and of course it generates questions, disputes and consequently frustration with the time wasted by this entirely unnecessary dispute. You can imagine the whole issue going from pillar to post and annoying everyone concerned.

Debtors simply do not pay upfront for projects unless they are in a firm agreement to do so. Is that difficult to understand?

Also an upfront payment is a credit risk for the debtor. Anyone signing it off is taking a financial and possible career risk too

The supposedly experienced CEO (check the CV is my advice..) has created three issues

1. He’s created unnecessary work for the client
2. An impression has been generated of a needy cash flow issue
3. He’s treated the client like they are idiots

Will they lose this business? I have no idea but its fair to say that they have not made retention easier

Will my client lose their CEO?

I think they should

Export invoice finance. A gap in the market?

Most Invoice financiers do not understand export. Bold statement but generally true. I will postpone my comments on the specifics on this subject for now because i’m currently negotiating a very promising substantial facility but suffice to say that when an invoice finance considers BP to be “high risk” because their office is in the “wrong country” then I go back to my first sentence. Invoice financiers do not understand export. A credit manager in the real world would immediately and rightly be fired for refusing credit to any division of BP in any location

This isn’t a subject i’m going to let pass so there will be more later but another angle is how few lenders specialise in “export”. Fortunately one in particular is assisting me and my valuable client right now and my good friend who is a long term first class, very well known and high quality contact has won over the client with superb connection and presentation but a competitive field of one is not competition

Yes lenders will back certain export accounts but with all sorts of restrictions and demands over the rest of the ledger (why exactly?) and frequently a sharp intake of breath and a visible frown when you state that the client is say, Glaxo in Switzerland or Apple in the Netherlands

I am engaging other lenders and I had a good conversation with another very good contact today but the market is thin when it comes to this specialisation with one large independent who did have a good presence, seemingly struggling to obtain “cover” for many jurisdictions

Invoice finance is a crowded market but too many lenders appear to be chasing the same business profiles and its reflected in certain. lenders struggles. One recent entrant has been losing most of its staff and barely writing any business at all and another new player illustrating funding problems by allegedly asking for 24 hours notice of any drawdown over £200k

Overseas transactions do have a level of complexity but no one is going to make a mark by simply chasing straightforward business. Also it might also be worth some lenders considering that whilst the UK market is supposedly “safer” in their underwriters eyes. to many jurisdictions, our insolvency laws are somewhat rackety and high risk.

Nat West censured

Sometime ago a business partner of mine suggested that “some people” (he wouldn’t say who) were claiming that I was “too critical” of banks on my blog. The assumption being that as a broker I should presumably be representing their interests and not my clients

Tough.

It should always be said of course that there are many excellent lenders out there and malpractice by certain employees does not represent a particular banks philosophy (stop laughing at the back..) but that doesn’t mean that such cases shouldn’t be highlighted and in this particular instance you wonder if the bank are really helping themselves?

The financial ombudsman concluded that it was “more likely than not” that a Natwest employer had encouraged a business that had ceased trading to apply for a bounceback loan to clear the remaining overdraft. Natwest claim that this didn’t happen but somehow the loan was issued through them anyway.

You can see the ombudsman’s point of view and it would of course be somewhat surprising if this was the only alleged instance of a bank processing government funded loans to dormant businesse’s to clear their own liabilities

As if it didn’t need pointing out, thats tax payers money being syphoned off to clear a banks liabilities.

And they say I’m too critical..

Today I stopped a Scammer. And some of you may know who they are..

A new client called me today seeking lending for buying Care homes. This is a very difficult sector for borrowers given a very mixed past record and I had to be honest with him that even with a complete fair wind, the best we could achieve was commercial mortgage on the property for 70% LTV (probably les in truth) and some financing on any available debtors. Naturally the remaining 30%+ of then property value would have to be sourced from somewhere else and it would not be easy to ascertain where without any solid security. To put its mildly

He’s a very engaging client and we had a very decent conversation but he said that he had been offered a 100% loan to value “bridging loan” provided a “valuation fee” was paid upfront. He said he couldn’t afford the fee of £8k and hadn’t paid.

I said don’t pay it.

Im not an absolute expert on the property lending market and channel leads through an excellent partner who’s market knowledge is first class but I did know that this proposal sounded somewhat unlikely.

Discussed this with my partner who had of course never heard of such an arrangement, least of all for an MBI. You can see where this is heading

The £8000 “valuation fee” had to be paid upfront of course and apparently the report was to be be sent to the lender directly. Im not of course stating that the “valuation fee” is excessive and that it will be paid with no intention of completing the lend but…

I cannot name the people involved (on here) but this husband and wife team were involved in invoice financing in the past and I recall meeting them in my early days as a broker.

I wasn’t impressed then and I’m even less so now but I’m delighted to have scuppered their “proposal”

Ridiculous contract clauses. Are they enforceable?

The answer is no

It is commonly assumed that if any term ‘agreed’ in a contract is legally enforceable but thats simply incorrect. “Unfair clauses” are comfortably challenged and my view is that more often than not, the vendor knows full well that the idiotic clause within their contract would immediately perish like and ice cream in the Sahara under the heat of a court battle and would be promptly withdrawn

But that doesn’t stop vendors from ‘trying it on’ and believe me they do. What is perhaps surprising is that its often long established businesses hiding under a cloak of respectability who are the biggest culprits but what is less surprising is that they are frequently found in that most respectable of sectors, construction

Past examples have seen a very well know (but charmless and aggressive) building materials provider attempt to sneak Personal Guarantees within their contract. That was quickly thrown out in first test case. Even in, what many would say, is the second shoddiest sector of banking its understood that PGs have to be agreed to in a professional manner

The latest example is one that has been inflicted on a client of mine who has had his borrowing heavily restricted by his invoice finance lender (not my introduction) who frankly should know better. The clause states that if my client goes under then all liabilities cease. What total drivel and of course that is unenforceable

In this case I am working with my client to put pressure on or find an alternative. We will but how do we stop such nonsense giving lenders the perfect excuse to restrict lending at crucial times?

My solution is simple. Clauses such as these potential waste a lot of court resources but as with cancer, the problem is best caught early and I would make a range of clauses technically illegal (as the EU did with the assignment clause) and punishable by hefty fines

Spiv invoice financiers. Avoid and avoid again

This is Viv the spiv, who actually exists. In fact he is an act which must be welcome fun at certain events but believe it or not, with the addition of a eighties blow wave haircut to go with the cheesy smile and worst of all, the pocket handkerchief, he’s a disturbing close likeness to a business development manager I met from a major lender. It baffles me that a lender can seriously believe that the average business owner is going to be impressed by such tacky image.

A business associate of mine once claimed that I didn’t look ‘slick’ enough for clients without appreciating that his somewhat ‘slick’ and slippery image has probably alienated many potential clients. Naturally I do not turn up to meet clients in a football top and shorts but the silk pocket handkerchief will not be present.

Does such a profile develop trust? I doubt it but image isn’t always an indication of tacky poor behaviour and recently I have once again come across a situation whereby a new client of mine is being treated dreadfully by one of the new breed of small lenders who swarming the market. I hasten to add that I am certainly not against new entrants and very much in favour of new products and approaches to lending but there has to be a degree of caution exercised. This particular lender is one I’ve avoided in the past and their reputation precedes them. My clients dealings with them should be simplicity itself, but they are not

Most lenders abide by a ‘code of conduct’ which was developed by the ABFA body and whilst I will not bore you with the details and the nature of the body, it was surprisingly successful in routing out much bad behaviour and sharp practice within the industry. And frankly there was too much.

This particular case has resulted in a solicitors letter and you do wonder why a small lender in the market appears to be determined to develop a bad name for itself? Word gets around very quickly and of course, bad news travels faster than good.

Sadly it appears that bad practices are creeping back in and needless to say, it is essential for new borrowers to access genuine industry knowledge and experience of who’s who. Which is where I come in. Without the pocket handkerchief