Bouncebacks abused?

By common consent, the “Bouncebank” loans have been a great success. Easy to apply for and the funds quickly received. All very useful for businesses and there is no disputing that those clearly adversely affected by the lockdown thoroughly deserve these facilities

But there is another side of the coin and one that may come back to haunt the government and irritate conventional lenders.

I know of one business that has grabbed £50k having barely traded at all since inception. There are stories of loans to SPVS set up purely for the buying of a property and even multiple applications.

It would appear that simply having a barely functioning limited company is enough to gain access to very cheap funding. We always have to take into account that the rumour mill can overplay scenarios but surely there are going to be a more than a few stories of taxpayers money finding trips to Barbados or a new extension

And understandably existing lenders are a little irritated. I would be certain that everyone I communicate with in the market would thoroughly endorse the lending to say Bars and Restaurants who have been severely affected through no fault of their own but when the facility is used to ditch an invoice financing facility or pay off an existing loan, then patience is stretched.

 

 

Cashflow. Vital for businesses during COVID

During these difficult times it is easy for businesses to put their heads in the sand and forget the fundamentals or simply panic. A very understandable human reaction of course and this is often where it pays to go back to some basics of which cash-flow management is arguably the pressing requirement

The key to managing cash isn’t just about being strong with numbers and analysis but more geared towards understanding competing requirements and showing day to day flexibility. The back of the fag packet analysis is usually far more accurate and useful than a murderously detailed spreadsheet ranging into the years ahead

To keep the eye on the ball as well as maintaining a strong overview, it is necessary not to get bogged down in too much detail. Ive encountered cashflow forecasts which were presented superbly and wonderfully detailed but were completely useless

Keynes famously stated that in the “long term we are all dead” and again this is a key point with cashflow forecasting. Also there is absolutely no point in analysing unless you can give weight to the factors (debtors are unpredictable, wages always have to be paid etc) and can negotiate your way around that terrain

To this end, its worth taking advice. My experience is long and been tested in many different and challenging scenarios and I am always available to discuss with clients but the ever excellent ICAEW off a very useful out line guide which is downloadable here

 

 

Invoice financiers furloughing staff

A number of invoice financiers have furloughed a number of their staff. This has been mostly targeted at “Business Development Managers”

This is understandable on the basis that new leads have dried up to some extent and client visits (a pretty essential part of the process) are off the agenda for now but the other side of the coin is that the market is not completely dead. I’m handling a number of leads at present and very close to completing two that are fairly significant in size

Lenders are also “reviewing their books” which will mean that certain accounts will be “let go” and often for reasons which will not be seen as entirely justified by a competitor. It is often thought that accounts that say a relatively conservative lender wish to “manage away” would only then be of interest to a less risk adverse lender. That is completely untrue.

Business Development managers get the majority of their leads from brokers. Clearly the terms of furloughing are that absolutely no work should be carried out on behalf of the employer during the furloughed period. The government (taxpayer) is certainly not in the business of funding sales development for invoice financiers so what happens if a BDM takes details of a lead or even follows up on it to any extent?

In fairness, one major lender that has furloughed staff appears to have handled this professionally with clear information to brokers to contact the senior staff still available but I know of unease at one smaller lender (one that I rarely deal with) about how this is being managed

We shall see how this develops

 

 

 

 

 

 

Bounce Back Loans. A success?

I would say so

A number of my clients have taken advantage of the scheme and have had remarkably quick results. They don’t all have the greatest credit records either and some would cheerfully admit that the requirement wasn’t exactly pressing

For more effective than the CBIL package, although the Bounce Backs are for capped at much lower amounts, this might not please everyone. Finance Brokers (such as myself),  some Fintech lenders, some conventional banks and sad to say,  some insolvency practitioners might not be delighted and I have seen some online rumbling.

We should cheerfully ignore their concerns. This is a bail out of SME’s. A justified one which, unlike previous “bail outs”,  has not been caused by their failures…

From my point of view, I am delighted that my clients are benefiting and i’ve had some very gratifying calls over the past couple of days. We work together for long term objectives and if that is not the preference, then we should not be working together at all

Furlough extended. Correct decision or not?

Ian Duncan Smith rather clumsily used the description “addicted” to describe the continue usage by employees of the 80% paid furlough scheme but did he have a reasonable point to make?

This blog steers clear of nakedly political points and when expressed, the views are generally centrist but there was surprise to hear the announcement that the furlough was to continue at 80% of salary until October

For many, the 80% is not far off 100% once the saved travel and day to day working costs come into consideration so this equates to six months full paid leave

Yes it is capped at £2500 but how might those who earn less than that feel in their difficult “front line” roles at the moment?

I have ignored but seen examples of gloating examples about “full pay sitting in the garden drinking beer”

The other issue is the eventual return to work. Will many employees kick against every effort to re-engage? Will they become “comfortable” rather than “addicted” say?

There is no envy on my part. I love my work but initial feelings is that this has perhaps been rashly extended at too high a rate for too long

The counter argument is that this is almost certainly a one off cost whilst government borrowing is at extremely low rates and it’s a price worth paying to keep the economy and confidence afloat. Its a strong argument too

 

Cinemas under threat?

Good piece here in last weekends Observer on the possible threat to cinemas with studios looking to send releases directly to premium video online streaming. Apparently this has been the controversial tactic employed by Universal Studios and undermines the established three month cinema window for new releases

Should cinemas and cinema goers worry about this trend? Its an interesting microcosm of how Covid is affecting the whole economy and the way we spend our cash

The article raises some good points specifically to the film industry but this is perhaps the most pertinent quote

“We are absolutely confident that when cinemas are able to reopen safely, the public will once again respond to the unsurpassable big-screen experience. After people have been required to spend weeks and sometimes months in lockdown, it seems unlikely, to say the least, that the first response of many will be ‘let’s stay in and watch a film

Absolutely correct.

Car manufacturing collapses. And?

One aspect of the coverage of the current crisis is the rush from certain quarters to headline the most gloomy and pessimistic news stories without perhaps the context they deserve. This has been a criticism of the BBC TV news and websites (although perhaps not Radio 4) and it is noticeable that positive trends have tended to be shuffled away.

So it’s perhaps  no surprise to see that the April collapse in car sales is headlined with relish. Yes it is news but it also can be categorised under the heading of “so what?”

It’s one months sales. Showrooms were shut. Manufacturing halted. What did the media expect exactly?

And manufacturers are drifting back gradually. Showrooms will surely soon follow being one retail outlet where distancing should be say to maintain.

In truth it will be the sales in August and September that we should be examining

April’s results are as irrelevant as sun lounger sales in January.

 

Suspension of Statutory Demands

The statutory demand has always been the blunt instrument of debt recovery. For those who aren’t aware, it is a demand for payment under threat of the issuance of winding up proceedings.

The problem with this method is that is results in a threat which isn’t likely to be carried out. Yes it can be tool to spur a debtor into responding but it should always be used carefully and the judgement of the debtor is vital. As a credit manager, I was always very careful before instructing

Furthermore they must not be used in relation to debt that is disputed in any way. The courts take a dim view of the heavy handed approach and failure will be costly

All that is irrelevant. The whole process is suspended  until the crisis has passed and who knows how long that might be?