Archive for April, 2015

Clueless underwriters

Over the last few weeks i have found myself despairing at the attitude of certain underwriters in the invoice financing sector. Like a punch drunk boxer past his sell by date they seem only to be aware of what can go possibly go wrong and have completely lost their nerve and sense of perspective. Some of the rubbish I have had to listen to in recent weeks has been beyond belief and I will save for another day but firstly i will recount a message passed back to communicate to one of my clients that demonstrated once again that there is too frequently a grand canyon of understanding between lenders and actual businesses

A client of mine has built a recruitment business supplying temporary staff to charitable trusts, local authorities and other large bodies. It has taken him 20 years and the business has grown to a turnover of £7m a year. He has used invoice financing for over 17 years

He has not previously and will not sign a personal guarantee because he rightly believes that all the debt is very collectable in the event of his unlikely insolvency

The lender has still demanded a PG. The reason given? The one the underwriter expected me to communicate?

“we need it to demonstrate his commitment to the business”

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Why use CPCM?

A little shameless promotion. Copied from a recent mailshot

Why use CPCM?

Invoice financing can be a minefield. An inappropriate arrangement can severely damage you or your client. Simple “introductions” to lenders do not suffice.

Full brokering is essential and here is why

1. The market
Full understanding. I was recently hired to analyse the full market and all participants for a major international bank.

2. Genuine impartiality
I work solely for my client. I do not seek reciprocal leads from lenders

3. You or your client
Nine times out of ten I will meet. It is essential to understand the business, the people and the future as well as current objectives

4. Debtors
The asset is the debtors. I have analysed debtors for over 30 years. Understanding and obtaining best value for the asset is key

5. The lender
I will attend meetings between the lender and the client

6. The solution
Satisfaction in a job well done. Finding the right combination of price and facility is the true reward.

Lastly if I do not believe invoice financing is the correct solution then it is my duty to inform the client

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HMV. The comeback?

It would appear that HMV is experiencing a significant revival. As longer term readers of this blog will know, HMV is a case in point that I have been following for some time, partly because of my experience of the sector but because it has been a near perfect illustration of wider developments leaving a business with an uphill battle and in this particular case, like a rabbit in headlights

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GE Capital. The end

geGE are divesting themselves of their finance arm, GE Capital.The plan is for the group to concentrate on its core manufacturing businesses and pass off the finance arm to the specialists, ie the banks. This piece covers many of the arguments in favour, some of which you may or may not agree with.

Prime amongst these is the suggestion that these big conglomerates cannot handle lending as efficiently as the the mainstream banks. Really? Dare we mention the word “bail out”? Whatever the certain statistics suggest, GE did not bankrupt itself in the process of losing control of financial transactions.

That may suggest to many a very cautious lender but I can only report as I find and what I did find was a lender that assessed prospects in a professional and often enterprising manner. More than once I found that they were the one lender interested in decent prospects that had been dismissed by the habitually lazy minded underwriters time serving at other lenders

Yes, GE could be a little ponderous and bureaucratic but their retention of clients was the strongest in the sector

To all intent and purposes they withdrew from the small/medium asset finance market late last year and i thought that was a great pity. To my mind they underestimated what a strong brand they were.Some lenders names are close to toxic but many of my client’s certainly responded well when GE was suggested.

I will miss their presence in the market but is it also worth pointing out a larger point to this change in strategy?

The shift from finance to industry is surely something that cannot go unremarked upon

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Fraud in invoice finance. Many thanks to Ashley Finance for notifying the market

See here

To quote

The company is warning others to beware after two of its small business clients lost over £100,000 between them.

In both cases, which involved firms in Wigan and Manchester, the fraudsters met their victims at networking groups. They posed as genuine businessmen who had clinched a major order from a big company which they were unable to fulfill themselves and offered a share of the profits in return for help to buy stock.

“In both these cases the fraudsters had infiltrated networking groups, where people tend to assume they are dealing with bona fide businesses.

“They then cleverly use the conversation to identify firms with access to established factoring or invoice finance facilities, and claim to have won a big contract which they are unable to fund themselves. They persuade victims to buy stock and invoice them for it and, to build confidence, may even pay the first invoice.

“These are highly sophisticated fraudsters who catch people off guard, come up with a plausible story and even provide a viable paper trail using the names of real companies and directors who are unaware of what is happening. However frauds such as these can be devastating for small firms.

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Paperlinx. An object lesson

1ff46d9c8f00e67b923ccd2d4fcb1abfWith a high profile in the ever nervous and fragile Printing industry, the collapse of Paperlinx has sent shock waves through the sector

But why has the business collapsed? The above article gives a number of reasons, all of which stem from sheer bad management but the most striking of which was;

“I have been observing Paperlinx for years, and their credit control was the worst. They were absolutely hopeless at getting the money in,” says William Martin, the managing director at Aston Colour Press in Twickenham. “I pay my suppliers promptly at the end of the month. I’d have the money ready for Paperlinx and they wouldn’t even ask. Other merchants would be straight on the phone, whereas they were giving me 90 days credit without me wanting it or asking for it.”

It is extraordinary that a low margin business cannot give priority to credit management. Sometimes you just feel that for some finance teams it is an area they do not wish to address or worse still, simply look down on

I have experienced this is some industries and in this particular case, whoever was responsible has no further role to play in the commercial sector

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Mike Ashley. Right or wrong?

_82063355_1d1cc706-a06b-4f30-8c21-09f5c2345dddI came across this story on the BBC website which is clearly attacking Mike Ashley, the high profile owner of Sports Direct, on a number of fronts of which the administration last year of USC is perhaps the most significant and led to this quote

Conservative MP Simon Reevell told the Scottish affairs committee: “Sports Direct had a company that was losing money, they now have the same company where the debt liability that had been incurred has gone.”

“At one level, to use a technical phrase, this all looks well dodgy,” he added.

The assets of USC were brought by another Sport’s Direct business. It clearly does not look good but “dodgy”? The fact is if it is legal then it is legal.

Should the law be tightened up? Maybe so, but whatever anyone thinks of Mike Ashley and his business practices, if he has not breached any laws then quite frankly he should left to get on with running his empire rather than answering to parliamentary committees and the IOD

A more balanced view is here

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