Boom in businesses sales. Heres why

This year, the proportion of my leads which are active MBIs (management “buy ins”) is the highest it’s ever been. These are always fairly complicated deals to complete because there are so many component parts and often my advice goes beyond simply the financing. I feel a responsibility to clients I work with and will discuss whether or not the pricing or structure is workable so consultancy becomes part of my armoury as well as financing.

This is helpful for the client because it’s often a lonely decision making task and their existing sources often do not see the bigger picture. Accountants can be risk adverse and lawyers can pick over the detail to the extent that Bothe siders lose the will to live. Business Brokers are, to put this kindly, a very mixed bunch

So why the boom?

Two reasons spring to mind. Firstly the availability of finance. CBILs enabled cheaper lending to dovetail with the usual asset finance and the Business Recovery Loan is now thought to be even more adaptable to business purchases. Simply put, buyers do not have to commit as much or even any, of their own resources.

Secondly the pandemic. Owners have simply had time to reflect and many more appear to be taking the retirement option or simply using the resources to try something new. The effect has been a crystallising of latent thoughts.and perhaps the realisation that life can change very fast and we are only here once (perhaps).

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Invoice finance and business lending market update

Its been a while since I last summarised the latest developments in the various business lending markets so here are a few of my observations and comments

  1. There are an increasing number of imaginative ‘fintechs” entering the market. Some have strong offerings and others are perhaps more simply expensive facilities dressed up to be something “easy” or radically different. Either way, it benefits the borrower although there is certainly a need for caution
  2. Conventional lenders in invoice finance have shrunk somewhat with Siemens surprise withdrawal from the market and Calverton’s sale being the most significant. More to follow maybe?
  3. As we all know, CBILs severely affected the lending markets and most especially at the smaller end. The invoice finance lenders lost many clients and they may be hard to win back
  4. Lenders that didn’t offer CBILs or the new BRLS have surely taken a sever hit? One or two high profile names really surprised me by their absence from the schemes
  5. Some lenders have been pushing prices upwards but whilst others stand firm, they are simply losing out. I know who is and who isn’t
  6. There its a tendency by some lenders to claim their offerings are “service” based with price immaterial. Service is important but as with driving and other activities I will not mention, no one is going to admit they are bad at it
  7. Credit insurance is being pushed by some lenders rather too aggressively. Not because of risk but simply to increase margins
  8. Certain lenders are increasingly and ludicrously sector adverse. Aerospace and hospitality two notable areas. This is nothing more than lazy underwriting
  9. The MBI and MBO sector is very active and I will be writing a piece on this soon
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Damning Watchdog report on Greensill

Lenders appointed to the Business Recovery Loan scheme have been put through fairly thorough audits by the the British Business Bank which is in direct contrast to the “limited due diligence” surrounding Greensill

The National Audit Office’s report is damning and the relationship between Ministers and the British Business Bank seemingly increasingly murky.

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Another deal completed but are you interested?

This is an interesting conundrum.

As a broker it helps my profile if potential clients are aware that I am actively engaged with the market rather than just sitting on my hands all day. The obvious evidence of this is through arrangements that i’ve managed to complete

The problem is that communications through various mediums from brokers simply boasting about the “deals they have completed” elicit what?

I would suggest that most favourable genuine response is a roll of the eyes.

And then we get the rather unlikely tales such as the broker who bragged on LinkedIn of completing a payout of CBILs a week before it was launched and another who stated they were dealing with “thousands” of applications. Ive also seen details of supposed arrangements which I know are silly not true

The background to a deal can be interesting if there is an angle explored or some innovative creativity but the other side of the coin would be that this risks giving away rather too many hard earned trade secrets

I have had a very good year and have been tempted to write up the most interesting (seven months in. the making), professional and near enough most substantial arrangement I have completed yet. Thats a nice way of me communicating that fact of course but as with many aspects of others personal lives, you may not wish to know the details

So I will continue to draw a discreet veil over the detail of my work but through this blog and my newsletter (new subscribers welcome), I hope to convey my dedication to keeping in touch with every aspect of this often fascinating market

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Invoice financing Fraud. How it happens

A useful piece here in the FT and sometimes its useful to remind clients who are understandably impatient with the various checks taken out by lenders, how prevalent fraud has been in the Invoice financing market.

The article is clearly triggered by Greensil, which has been superbly reported by the FT and is also likely to throw up a lot more dirt.

I can recall being approached by fraudsters at least four times and they often have a convincing take to tell. Fortunately in each case, I was able to spot the irregularities and alert the lending market. I also took note that in each case, other brokers had greedily passed the leads onto lenders without even cursory checks

That might be me sounding a little holier than thou but attention to detail is essential for all sides

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Business Recovery loans. Up and running and points to consider

Finally it appears that the scheme is up and running and in many ways there appears to be some greater flexibility with eligibility. Certainly there is thought to be greater scope for MBI and MBO funding.

The delays were frustrating and in truth the responsibility was largely with the British Business Bank and their mixed messaging but thats now in the past

I am working with a number of clients to enable the lending and here are a few points to consider

  1. Fees and interest will be payable from the first day. There is non of the grace period allowed to CBILs
  2. As with CBILs, lenders can charge up to 15% apr. This isn’t necessarily cheap lending
  3. Your high street bank will offer the best rates. As a broker, that is far from self serving advice because but thats the truth of the matter
  4. If you cannot complete with your bank or they are simply slow, then there are options with independents
  5. Invoice and equipments financiers will offer the next best rates but you will have to take their products as part of the package. This is an area where I can certainly assist
  6. Compared to CBILs, there are fewer lenders
  7. Be very careful with the clauses. One high profile fintech (as referred to in my earlier post) has a very restrictive clause which could be very damaging to your business.

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A less than charming Trade Financier

A couple of years back I met a partnership who provide Trade Finance for “small businesses and SMEs”. I met them at a Broker event hosted by a major lender and this being a rather specialist area with very few players, I thought it worthwhile to make contact

By chance I had a lead and called them. I might have been called many things in the past but not inarticulate and I thought I explained the proposal well.

The attitude and response was the most patronising and simply rude I had experienced in ten years of brokering. Without question

A line went through their name and they were largely forgotten about until last week when I met with a challenger bank that has a relationship with them. This senior guy said that one of his clients, who is level headed and not precious said, “do not send these gents to me again”. Ive altered the actual description slightly…

Trade Finance has always been a narrow field and lenders come and go rather too quickly, with Scottish Pacific being an unfortunate high profile departure in recent times but no one should ever take their position for granted

But there are some new players in the market and i’ve found their approach to be quite excellent. There is one in particular that is impressing me.

Today I have alerted two banks that have relationships to this lender (who’s clearly have far more Cons than pros) to the competition. Its nice to reward good service and hard working relationships

No lender in any sphere should take their position for granted. The hubristic approach will always alienate and come back to bite.

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Is this prominent “Fintech” lender ethical?

Perhaps their TV advertising should appear more akin to the above ?

A very high profile lender which has been offering CBILS and now surprisingly been adopted to the BRL scheme, has been inserting clauses into the client agreements preventing the borrower taking on any additional lending during the duration of the CBILs loan, without their permission. Effectively this is a charge that isn’t a charge.

Thats fine if the permission is granted or at least addressed although the way it has been inserted into the contract has been seen as pretty unethical but i’m hearing that they are simply not replying to requests

Shall I name the lender? Think of their initials and how they match the phrase that many investors, brokers and borrowers use to describe them. Fondly ? Cuddly? No Friendly Gents? No.

They will argue that everyone has a chance to consider the terms but they should perhaps think again. Although this isn’t regulated in the manner of the consumer market, terms can still be deemed “unfair” bye the courts. I recall a prominent building supplier finding that a well disguised clause that was effectively a personal guarantee was ruled as invalid by the courts

This will be and has already been causing ructions in the industry and expect it to be legally challenged very soon

In the meantime, I would strongly advise against anyone taking out any commitments with this lender

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Business Recovery Loans. A launch like the Titanic

The SS ‘Titanic’, leaving Belfast to start her trials, pulled by tugs, shortly before her disastrous maiden voyage of April 1912. (Photo by Topical Press Agency/Getty Images)

It’s been well over two months since the “launch” of the BRLS and most lenders still haven’t worked out their criteria for eligibility.

This is a bit of a shambles with clients of mine queueing up and somewhat baffled by the shoulder shrugging responses. A great deal of the blame lies with the British Business Bank’s instructions apparently muddled as well as the necessity for tiresome and protracted “audits” of the lenders (albeit necessary given the Greensil shambles) but also the lenders themselves appear to be pretty unprepared.

Why is this?

I have a theory and leads back to our current circumstances. It’s very much down to work from home or should that be “work” from home. A few heads knocked together in an office and things get done. There is peer and management pressure to do so. Soporific zoom calls and being slumped in front of Countdown do not count for productivity

There is an absence of energy in the lending market at the moment. Another good example is a lender where my excellent contact recently retired. The replacement I know well and is experienced. The communication so far?

“are you close to Staines and are you around next Monday at 11”

Fairly and no was my reply. You would assume that it would be to their advantage to meet up
In fairness, I do not get swayed by meeting lenders and I rigorously stick to exploring the market without prejudice but its useful to know who’s doing what

Not heard a peep since and this is a few weeks ago from a invoice financier that claims to be aggressively expanding in the market with new investment.

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WordPress. A shambles

Last year, WordPress changed from the “classic” input to “Block Editor” and believe me, it is hard work

Im unsure whether I will be posting through this platform going forward. The interface is way too difficult to use and functions such as posting images and quoting from articles appear top have suddenly become a major battle

This is a classic case of not being able to leave well alone. WordPress worked. Now it simply doesn’t.

Some idiot trying to justify their inflated salary by making change for changes sake and alienating the client base

Im not IT illiterate or an expert and ill try again but im not hopeful

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