Archive for August, 2017

Aldi. The good guys

3ALDI_Store_Exterior__RightAldi Aldi are cutting terms to 100 small suppliers to 14 days. This is reported in the Irish Times and its not clear whether this applies outside Ireland but either way, this is a move that seperates them from so many of their bullying competitors.

Aldi and Lidl have long had a good reputaion for looking after suppliers and this has made their contracts easy to finance. Lenders have a great deal of respect for them.

Whether this signals a change in market attitudes is unlikely and sadly its impossible to envisage certain chains treating their suppliers with anything but continuing contempt

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Ratesetter woes continue

Ratesetter-678x381Ratesetter have left the Peer to Peer finance association and it looks like a case of jump before pushed. This revolves around their use of own capital to prop up some significant and surprisingly high risk lending. The whole ethos of peer to peer is that there should be transparency for the investors (more accurately “the lenders”).

Some may ask why this is so important if their potential losses are being underwritten. The answer to that is that investors need to know that the credit approval processes of the platform lending their cash are adequate. In this case this would certainly not apepar to have been so.

All this is a pity because, unlike their major rival, they are good people to deal with

The peer-to-peer lending industry is awaiting the outcome of a review by the regulator, which is expected to force platforms to provide greater transparency for investors over the performance of loans and the way in which credit decisions are made.

The FCA have become involved and it is likely that this will have an impact on the industry. Probably a good thing because claims by at least one of their competitors  about the supposed virtually zero level of bad debts incurred are very difficult to believe

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Air Berlin crash


The failure of a airline is hardly news. For decades this has been rightly seen as one of the most high risk sectors for credit but this particular story is due to run and run given some fairly strong words from Micheal Ryan of Ryanair

Ryanair said: “This manufactured insolvency is clearly being set up to allow Lufthansa to take over a debt-free Air Berlin which will be in breach of all known German and EU competition rules.
“Now even the German government is supporting this Lufthansa-led monopoly with 150m euros of state aid so that Lufthansa can acquire Air Berlin and drive domestic air fares in Germany even higher than they already are.”


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More on Cobra Beer


Following on from Leumi’s disasterous lost case claiming ‘collection fees’ follwoing the collapse of Cobra Beer, it is worth remembering that this was not exactly a great advertisment for pre pack administrations . A lot of creditors were left high and dry but the other side of that coin was whether their collapse could have been predicted? Times are busy at the moment but when i get a moment I will be looking at their last filed accounts. Yes it will be a case of wise after the event but my experience has shown me that a high proportion of company failures are very predictable

One aspect of Leumi’s case was that they were seeking to chase down a personal guarantee. Now it would certainly appear that the owner had considerable assets and many would say fair enough but they should also look at it from the legal systems pioint of view

Emotion shouldnt come into legal rulings of course but the prospect of a bank attempting to seize the house of a struggling businessman (although that was not the situation here) is not a pretty one. Most banks understand this and refrain from imposing unless the case borders on fraudulent. There are a couple  exceptions including one major bank and a smallish factoring company  and its a factor I take into consideration on behalf on my clients but generally common sense prevails


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Consortuction sector struggling?


Construction had a dip over the second quarter of this year and the decline was the biggest in five years.

Is this a matter for concern or simply a blip? In many ways it was perhaps to be expected given the uncertainty over Brexit and the possibility (which I think is slimmer than many believe) that we could have a change of government.


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“Collection fees”. Is the end in sight?

50f8f4e951d24440bef3a4928cc5115aMore than any other issue, Collection Fees charged when an ABL’s client becomes insolvent have caused controversy in the industry and arguably given invoice financing a poor name

To briefly explain the Collection Fee is a fee levied on the value of the ledger when a client is “insolvent” and the lender collects the sums due from the debtors. All fine but hidden away in the contract these fees can be charged at rates as high as 60% of the value of the debtors

That means that if a smallish business went into administration with debtors of say £200k, the charge for collecting these debts would be £120k

Clearly that is ludicrous and the ugly side to this is that the lender will make far more from a debtor failing than suceeding. Its no secret that certain lenders have engineered this scenario.

A honourable exception here is Metro Bank who dropped all collection fees from their agreements a year or so ago

So what has occured to challenge this arrangement. Read the case below.

Leumi ABL have been a very decent lender but they have horriby overplayed their hand in this case. I wll also be commenting further on other aspects of this case


The long-awaited judgment in the case of BHL v Leumi ABL Limited has been delivered in the Mercantile Court. The case concerned a challenge to collection fees amounting to £1.216m plus VAT charged by Leumi under a receivables finance agreement entered into with its client, Cobra Beer. BHL, which had provided an indemnity to Leumi for sums due and payable under the Cobra agreement, had paid £950,000 in part-satisfaction of the amounts Leumi demanded for what it said was the shortfall on the collect-out of the Cobra ledger.

After Leumi had made demand for yet another £490,000, BHL decided that it had had enough and commenced proceedings against Leumi for repayment of the £950,000. BHL argued that the monies were not properly due and payable because, although Leumi had a contractual discretion to determine the amount of the collection fee, it had not exercised that discretion or it had done so improperly. By the first day of the trial, Leumi had corrected other errors in the current account so that the amount claimed had reduced to £271,382, but it maintained that it was still entitled to its full collection fee that amounted to 15% of the amounts collected.

The judge disagreed with Leumi: he held that its actual costs and expenses incurred during the collect-out amounted to £33,260, and he determined that Leumi should have charged a collection fee of no more than 4% of the amounts collected. After the relevant adjustments to Cobra’s current account had been made, the judge held that BHL had overpaid by £735,000. That sum had to be repaid together with interest and the sum of £780,000 on account of costs.

The case is an important example of the extent to which courts appear to be increasingly willing to scrutinise the exercise of discretionary powers in a commercial context. It will be of interest to all those involved in making decisions in the banking and finance sector.


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Another PTP lender goes to the wall

There was always bound to be some shaking up of the peer to peer lending market in both loans and invoice financing but there will be fears that a trend is developing. The knock on effect of this is that investors will increasingly become very wary.  The piece below indicates that more players will enter the market but who would want to back them?

I was aware of Due Course but my recollection is that they didnt strive to enegage with brokers. This isnt essential to the businesses success but also doesnt really assist either. Reading between the lines it would also appear that hey might have taken a big hit. If so this would not surprise given that they were seemingly a pure online platform

Lending purely on numbers is a very dangerous game. The PTP lenders will have to realise sooner or later that the banks, for all their faults,  rightly take the view that they are lending to businesses and their people first and foremost. Not a dated balance sheet

UK-based DueCourse, a cloud-based invoice financing start-up, has run its course with the revelation that it has gone into administration.

The bad news comes less than a year after it received £6.25 million in funding from investors, including the founders of TransferWise, and non-fintech firms such as LinkedIn, Zoopla and Lovefilm.

According to online publication Prolific North, creditors have been notified that Leonard Curtis and John Titley were appointed joint administrators on 14 July.

There is no announcement on DueCourse’s site (yet). Its last blog post, in March, announced that it had been selected for online accounting software firm Xero’s “curated list” of business finance providers, part of Xero’s App Marketplace.

Manchester-based DueCourse was founded in 2014 by Paul Haydock, Jon Grove and Tim Borden. The three had formerly each run their own small businesses. The firm was targeting the popular SME market by offering software to link a company’s online accounting platform – which then checks which invoices were eligible for a cash advance.

Prolific North says at last year’s funding round, DueCourse was planning to raise a further Series A round of £10-15 million to fund global expansion. Earlier this year, the company had taken its headcount to 15 with the recruitment of four new staff.

Responding to a request for a comment from Prolific North, Haydock says: “We have decided to close one of the companies in the group as part of a planned restructure.” No further information was provided.

As we have said before at Banking Technology, not everyone can triumph in a very crowded and competitive fintech arena. The blood-soaked remains of DueCourse will be mopped up and new challengers will inevitably emerge to chance their arm.


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