The current invoice finance market. My observations

It naturally goes without saying that these are exceptionally difficult times right across the economy and the picture is changing daily. Different sectors of finance are coping or adjusting in different ways and invoice finance is no different. However the picture is far from bleak in this sector which is arguably the most active of all, bar CBILs of course

Here are a few observations

1. Most lenders are not willing to look at accounts attempting to change lenders. Naturally they are casting a sceptical eye over such cases but arguably that could be seen as a little too broad brush. Also I sense that this restriction is beginning to ease but i’ve advised some clients to “stay where they are” and revisit in a month or two when market might be easier
2. This is largely a result of underwriters being overwhelmed by the task of having to review current accounts but this will also lessen in impact
3. Surprisingly perhaps there are a small number of lenders very keen for new business. These aren’t necessarily the cheapest in the market and tend to be  established Fintechs, but they are not necessarily premium either
4. Certain lenders may be having problems accessing funds because of their poor credit judgements in the recent past. Also the cost of funding has increased slightly
5. Turnaround times are sluggish for contracts despite assurances. Ive also seen fairly disgusting example of blatant lies from one BDM regarding turnaround to a business manufacturing PPE equipment. Imagine the fall out if they had had to stop production?
6. Having said that turnarounds a re still quick with “single invoice ” providers and many Fintechs who are more geared to working remotely
7. Some lenders will not lend until they can meet clients in person and survey on premises. They are surely going to have to adapt
8. There are too many rumours about who is doing what. To name names, it has been put about that Hitachi were closed to new business when in fact the are probably the most open of all the lenders.

A complex picture and one that is best negotiated with a broker who works solely in the clients best interests

The latest of Government support for innovation

Overlooked a little in the maelstrom surrounding the CBILs scheme is the governments support for R&D and innovation. This is particularly vital for enterprises that are bleeding a little red ink whilst they are in the long process of bringing products to market

My friend Sian Castle has written an excellent blog piece on this area with a thorough explanation of what’s available as well as the terms, which might raise a few eyebrows

The death of Virgin

Virgin Atlantic has had it and the public’s reaction is “so what”

It is the final nail in the coffin of Branson’s slightly laughable image as a ethical businessman (as previously blooded, his reputation in music was absolutely foul, as I can verify) but the key factor here is that it is just an airline

Airlines have come and gone repeatedly over the years. Think Laker, Court, Monarch, Dan air, British Caledonian, Pan Am, TWA, Sabina, Swissair and of course Flybe. The list is endless and no industry has so many collapses (I daren’t say “crashes”)

The fact is that airlines come and they go and are very very easily replaced. New lick of paint with new logo and off they go again

Not quite that simple of course but not far off. Virgin can disappear and another airline easily slip into its slots. Branson wants a “bail out. He can forget it

CBIL. How credit assessment works

There have been calls in the media, including from leading financial journalists, for lenders to make public their reasons for not approving CBIL loans

That sounds fair of course but the problem is that lending criteria to businesses is not straightforward and considerably more complex than to individuals

There are a huge range of factors to consider. It’s not just a case of the house you own, income and expenditure and age. Business assets are far more diverse and of varying value and incomes and expenditures will fluctuate massively because of a whole variety of reasons from sector to the quality of the management

I assessed credit for many years in the commercial sector and its a bit of an art rather than a science.

That can be unfair of course but it doesn’t change the reality that decisions are often difficult to communicate in just one communication

Barclays CBIL. Performing?

Further to my piece on the stats, the answer is yes

A client of mine has received very good responses and service from their relationship manager and whilst I will not go into the detail, the options given were fair and reasonably generous and transparent

It was also unexpected

Its good to pass on some good news

CBILS So who is lending and who isn’t?

So which banks have been performing and which are dragging their feet? The findings below reflect my experience of the market

Quoted in the Times yesterday

RBS   5001 loans

HSBC    2026 loans

Barclays, Lloyds and Santander “refused to reveal the extent of their lending”

A week ago it was claimed that RBS had granted around 70% of all loans. If that is consistent with the figures about that would indicate that the three banks “refusing to disclose” have barely approved any lending at all.

This has to change. If two banks can perform (to a limited extent) then the others have no excuses at all.

Although its dangerous to pin point one experience and tar a single brush with the inadequacy of the response but i’ve seen an absolute shocker from a relationship manager at Santander.

But there is perhaps some good news. Fintechs are signing up to the scheme and this is seemingly being led by Funding Circle. For many brokers, Funding Circle are far from a favourite lender but the past is past and I am in contact  exploring possible options

These are difficult times and i’m seeking any solutions I can for my clients

CBILS. What could go wrong?

The clue is in the photograph

For those unfamiliar with the setting, its Marbella.

What has this got to do with CBILS? Nothing at the present time but a few months down the line its not impossible to imagine certain newspaper headlines

To track back, the difficulty with the CBILS scheme is guaranteeing the money is used for the purpose intended. It is for this purpose that the banks have been enlisted to grant the approvals and largely because of the relative looseness of company law in this country, directors freedoms can be abused

Some have questioned our CBIL structure compared to Germany’s (which I will perhaps cover in more detail) where the lending is 100% by the government and the criteria is very light touch. Thats fine but it should be remembered that German businesses find it far more difficult to become incorporated and insolvency laws are strict

Before people start jumping on the German model as an ideal template, there is a very strong argument that it also restricts innovation and enterprise. Perhaps why their IT sector is very leaden compared with the UK

The other side of the coin is that UK businesses have to be looked at far more carefully. There have been cases where the responses from banks have been awful and ill be illustrating one horrific example shortly, but who wants to throw tens of thousands at a business owner who’s going to simply going to take the money and run?

Which leads us to the yachts in Marbella.

Does the government money wish to see headlines future down the line highlighting some second rate Philip Green swanning around on his tax payers funded yacht purchased immediately after his/her business folded ?

 

So who was it that pulled out of CBIL?

I gather it was Aldermore  (two sources) but i’m happy to be corrected. The question should perhaps be whether they should be criticised for doing so?

Thats dependent on the reasons given but it should be remembered that a large number of lenders are not party to the scheme. I also get a sense that some lenders are claiming the are “joining it within weeks” without perhaps the real intention to do so?  Also one invoice financier, that is very much part of the panel, has effectively shut up shop anyway

Either way the shocking figures that just 2000 loans have been completed confirm that the scheme is certainly not having the desired impact. The reasons are manifold and perhaps its difficult to lay the blame on any one party but I do question whether the banks have made a real effort to assign or recruit staffing resources.

Perhaps they should be transparent about what they are actually doing to deal with the huge backlog?

Lender pulls out of CBILS

I havent identified who it is as yet but this has been tweeted by James Hurley of the Times

More to follow

A non-bank lender is pulling out of CBILS because they can’t take personal guarantees under £250k. Wonder if that policy tweak has further reduced risk appetite of mainstream lenders too. Feels like structure of scheme is fundamentally inappropriate and wholesale rethink required

 

Nightingale Hospital. A stunning achievement

This is hardly news but its worthwhile re-emphasising. The completion of the Nightingale Hospital in such a short period of time is a stunning achievement.

There is nothing to add.

Thats all that needs to be said