Clueless credit ratings

Last week I started working on an invoice financing arrangement (now completed) for a business with one particular stand out client. Not an unusual scenario of course

Their client turns over £12m a year making a healthy profit and has a net worth of £500k. in addition the net worth closely reflects the working capital. They are growing fast and have sewn up a niche in a serious but rapidly growing market

Nothing to dislike there but one lender resorted to simply looking at a credit report on this business. The agency they use is not, lets put this kindly, the best in business and they had given the client a “nil” rating. This on what are clearly strong accounts as well as no adverse legal information with the filings were bang up to date

On that basis they didnt take even the slightest step to engage with my client.

Thats their choice and as anyone who knows me will tell you I was talking to handful of other lenders at the same time. One of whom managed to get the client insured for credit up to £100k

Credit ratings are very subjective and often simply plain wrong, all of which leaves me amazed that so many highly paid underwriters cannot or simply will not look beyond the half baked rating of a clueless credit agency

Dont ever complain about a lack of business if you are not prepared to work for it

 

 

“leading banks to leave the uk”

But the high profile and ever entertaining Guido Fawkes website disagrees. And they are ready to put their money where there mouth is

The story appeared in yesterdays Observer but does look like a piece of lobbying, especially when you look at the closer detail

It still remains to be seen whether a “leading bank” will actually up sticks but it does remind me of a heated exachange on a forum. I was told in no uncertain terms that if the UK leaves the EU all the major banks will relocate to … Switzerland

 

Welcome to Canada

But not if you are from the EU or more specifically a region of Belgium.

Although this story has been bubbling along for a few days now and has just come to a head, I wonder if the genuine implcations have been fully appreciated?

To put it simply, the uk does not and will not have a trade agreement with Canada because of a “staunchly socialist” region of Belgium which apparently views all trade agreements as disgracefully capitalist. This will of course change when the Uk leaves the EU and will be free to negiotiate with Canada without the risk of a veto from Wallonia

We have of course been told repeatedly by those that wish to stay in the EU that trade agreements are vital and without them the UK economy is heading for disaster. This is very questionable and if that really was the case then how come the EU has proved to be completely unable to reach agreements with the vast bulk of the world’s economy without necessarily collapsing into  economic disaster, despite the best efforts of those who believed in the euro?

We are still part of this construct but still managed to trade with China USA Japan and of course, Canada. The other side of the coin is that getting 27 states and even more regions to agree to an agreement with the UK is going to be difiicult to say the least but isnt that more than balanced by those agreements we seek to gain where the EU has failed?

 

Brokers. A jack of all trades ?

Earlier this week I was discussing brokering with one of the leading independent lenders . The subject turned to the issue of specialisation and capability. You may ask exactly what I mean by “capability” but that will shortly become clear.

The chat revolved around how increasingly complex and gratifyingly varied and flaxible the current debtor finance market is. This in itself makes it difficult to keep pace with.

At the same time there are many who believe they can manage this across not just invoice and trade finance but across the whole lending and finance market. Not just b2b but b2c too. Good luck to them but I will reserve my right to be extremely doubtful.

My contact informed me that a recent entrant into the market found this:

1. There were over 300 lenders
2. There were over 23000 products

Those figures may come as a surprise. I suspect they would be surprising to those who claim full knowledge of finance across all markets

With over 50 active lenders active in the invoice and trade finance market and it is a challenge to keep pace with their ever varying appetite and range of products. Its a very welcome challenge too but  as much as I have confidence in my knowledge of that market, I will concede that I am not capable of keeping in direct touch across 23000 products across all finance.

Specialisation is key and I always believe in finding the right specialists. Fortunately I have a good range of contacts.

As a borrower I would expect nothing less than thorough capable expertise.

 

 

Brexit by maps

For those who are still interested in the brexit result, this site shares a whole range of maps detailing the results across a whole range of criteria and analysis.

 

 

The Banks Brexit question

Sourcing loans from the major banks is an exercise which severely tests the patience of any business. A way can be found but it is the most tiresome process. This has been exploited by the “fintech” lenders who appreciate that business oweners might just pay a little more if the sheer hassle is reduced

No one expects that loans will or should be granted with little enquiry but i have recently been told that the following question is now included in a major banks application form

“How will Brexit affect your business over the next two years?”

Given that brexit wont even come into effect until two and a half years time at the earliest and given that no one has any idea of the terms of leaving, how on earth is any business supposed to be able to give a definitive answer? And what are they supposed to say? Effect will be “negative” thus blowing the loan application out of the water?

 

Factoring companies. My newsletter piece

Last month a small but fairly well establushed factoring company went into administration. Although this is not the place to discuss the actual details of the collapse, the word is that there was a fairly significant loss to their funders.

First Capital were a fairly traditional factoring business and to my mind that was perhaps their problem. I met with them and found the contact to be very pleasant but I also subsequently ran a number of proposals past them and found that they had no real edge in the market in terms of risk, price or service.

Their difficulty is that borrowers have far more options availble than even just a few years back. What some lenders perhaps do not fully appreciate is that many clients in the past took on factoring (which is essentially invoice financing where the lender takes over your credit control) on sufferance. There was no alternative. Or so they were told

Very few of my clients actually use factoring and where they do it is because it is abolsutely appropriate to their needs. As an option the pros and cons have to be thoroughly explored.

Now there are more alternatives than ever before. The online funders have greatly shaken up the market and are continuing to develop their models. Many exisiting funders have responded postively.

A genuinely competitive market will have its casualties and it could be argued that this is a healthy sign rather than an inert limited number of players that we see in other areas of finance.

With so much competition the power is with you and your clients.

Naturally enough expertise is required to navigate the route to the very best long term option. As many a lender has said privately, there has never been a greater requirement for specialist brokers

Emily Thornberry and contempt for voters

Following the arrogance of Liam Fox the “brexit” voters have now been patronised in a pretty disgusting manner by the consistently awful Emily Thornberry

For a leading politician to ask an audience  live on TV how many Brexiteers in that audience voted to “take their neighbour’s job away” demonstrates not only a serious lack of intelligence and judgement but also a deeply offensive patronising attitude. Not the first time we have seen that from this lightweight, although some might disagree with that description of her in certain contexts

 

 

Further RBS disgrace

 

The details, if you can stomach them are here

Lets not mince our words here. This is disgusting behaviour by a major bank and I would like to see everyone involved fired immediately whilst also being subject to legal actions taken by the businesses they ruined in search of their pathetic little career path

Perhaps the business owners can take some succor from the knowledge and widely held belief in the world outside of the seedier end of banking, that they are ten times the people that these worthless suits will ever be, but thats not much to go on when you have lost your house because of some non entity’s pursuit of a bonus

 

 

Ed Butynsky

This phtographic exhibition at the always excellent Flowers Gallery  in Dalston is unmissableunmissable