Predictions for 2021. The lending market

Every January this newsletter makes predictions for the forthcoming year for the Asset Based lending market but this year is clearly difficult.

But there are some trends and movements which are probably worth noting

1. The big four banks drift away from invoice financing will continue. Existing clients will possibly encounter price hikes and a drop in facility size and service. This is the year that the independents will take possibly their largest share of the market yet. This would be the year that rumours of a major bank finally pulling out of invoice financing finally come to fruition

2. Straightforward lending funders have either been bolstered or hit by the CBILs. The boost will not last for much longer and there are already signs of new lenders ready to enter the market to snap away at the heels. I also believe there could be a major failure in this sector.

3. More lenders will come into the market in very niche sectors. An example is lending purely against one online re-sellers contracts. R&D tax credits and Trade also have some excellent nimble niche players. Specialisation is key.

4. There will be a public backlash against the Bounceback loans (less so CBILs) once the many frauds have been uncovered. This will be a major press story

5. There could be some consolidation in the invoice finance market but also I am hearing of new entrants. All very healthy

6. The Insolvency Profession will come under greater scrutiny. Not before time many will say but this will not be an environment where abuses will be acceptable. Banks and IPs must be fully aware that SMEs and business owners have a great deal of public sympathy in these times.  

7. Credit Insurance will continue to tighten and that will impact on facilities at all levels.

Brexit and the forgotten SMEs

DPD have temporarily put parcels exported to the EU and small businesses are complaining about the extra costs and seemingly endless associated paperwork. This undermines a tricky start to Brexit and needs to be resolved

As I understand it, it is actually simpler to export large transactions than relatively small items. This is covered nicely in this Times article and rather more alarmingly in this Observer piece.

My view is that these things will iron themselves out over time but will certainly need some tweaking but one line in the Times article was striking

While the government is taking a light-touch approach to checking import decelerations for six months,

Are we in a situation whereby the EU states are taking an inflexible line whereas we are using a “light touch”?

If so, then perhaps that needs to be examined. We should be encouraging trade in both directions but perhaps not on the basis that one side is a keen advocate and the other is not. Certainly if the above is true, then we can play the “high ground” card but do events over the past few weeks lead us to believe that will be effective?

Lloyds and Satago invoice financing link up. What does it mean?

Usually I avoid discussing specifics regarding lenders in the invoice financing market. If the comment is negative, it can easily rebound as I found when I published a rumour about a lender least year which was vehemently denied but then found turned out to be completely true.

Nothing negative to publicly say about Lloyds and Satago who have both serviced clients of mine. Lloyds are familiar of course and its striking that year on year their very dated system is never updated. Satago, I have known well from their start up and whilst I thought their original model was very flawed, they have developed very well in the market and I like them

So what’s the link? After reading this story, |I am still asking myself the same question but on the face of it Lloyds are trialing use of Satago’s platform for Lloyds clients and also providing the funding. Satago make a public statement about their offering of debt chasing which is email based and frankly not recommended by me (putting this politely) and also their “risk platform” but the key is the actual funding and the relationship and this its where more clarity would be welcome

Is this akin to the Barclays/Marketfinance model where Barclay’s refer clients they will not fund directly to Marketfinance or just simple use of technology?

I hope not. Lloyds are one of the cheaper lenders in the contracted invoice financing market where as Satago are premium prices in the “single invoice” market. For banks to suggest that “single invoice” is the only alternative solution when there are over 50 active lenders offering a huge range of solutions, is absurd. Banks should be encouraging clients to seek solutions from right across the market. That should a basic duty of care for their clients.

Lets hope that this arrangement is a little more sophisticated than simple referral but the press release could certainly be a lot clearer

Lockdown fatigue “harming businesses and workers”

So says the head of BT

Philip Jansen, 53, said the “metrics on how tired people are, how stressed they are, how mentally challenged they are from a mental health point of view” were of concern, prompting the company to offer greater support.

“There is a lot of fatigue within the organisation, within BT, but I’m sure that’s true of every organisation. We’ve got 120,000 people. They’re tired and they are bored of the mode of operating, which is very one-dimensional and lacks the interaction of humans in the way that we are used to.”

Too true. Fortunately I have a personal way around this situation and also working solo and staying motivated is essential to my role but those who claim “this is the new way of working” haven’t a clue frankly

Last week I actually met a new client for the first time in far too long (its is actually allowed for financial services under HMG guidelines). They were very engaging but the whole dynamic was so so much productive than yet another Teams call. And enjoyable too, which is the key. We are simply not designed to be one dimensional faces at the other end of a screen. Fortunately most of my Teams meetings have been successful but there is still no substitute for being there.

And here’s an interesting point which I believe has strong validity. Maybe we should be seeking the simple phone rather than the dreaded video a little more?

(instead of video calls) He said he was doing more phone calls and is trying to exercise every day in some “shape or form”. Mr Jansen, who was one of the first senior UK executives to be diagnosed with Covid-19 during the first lockdown last spring, is a keen cyclist.

“I have found it very difficult. I found myself feeling the squeeze of the lockdown. I can physically feel it as I’m working.”

Insolvency industry and Banks under the spotlight

• 

Interesting piece in the Times and many would say this is well overdue. I will highlight some lines and readers can make their own judgements.

When businesses go bust their biggest creditors, usually banks, appoint insolvency firms to recover assets. That has prompted accusations among the stricken businesses that the recovery firms act in the interests of the banks over those of the business or other creditors.

Hard to argue with that statement

Prominent scandals have included the administration of the electrical goods retailer Comet Group. Neville Khan, 57, a former star partner at Deloitte, was severely reprimanded and fined £50,000 last year by the Institute of Chartered Accountants in England and Wales for failures in his handling of the administration. The institute found that Mr Khan did not “take reasonable steps” to ensure that he was objective.

Would only state that £50k was too lenient.

James Russell, partner at Humphries Kerstetter, said: “What we are interested in exploring is whether such behaviour is indicative of a wider systemic problem. If these problems are endemic we look forward to working with the APPG to find ways to address them for the benefit of the insolvency industry and the wider economy.”

No comment….

Landlords whining again

Here we go again. The British Property Federation are complaining about the “use of CVAs” by retailers to dump rent obligations. It is being described as a “cynical practice”

Of course there is an element of truth in that but why do landlords consider themselves to be entitled to privileges over and above those of other unsecured creditors? Yes their exposure is high and yes its not simple for them to cut off supply by eviction but that is all part of the credit appraisal. That should have been part of the equation when they first took on the tenants.

Frankly their problem is almost certainly close to home. Oversupply. And thats something which only they can address

Can the UK still export with ease?

During the past few weeks, we have heard a lot about difficulties with the export chain following Brexit. This was partly triggered by seemingly politically motivated actions by France but also by the publication of the flowchart for exporters detailing the extra procedures necessary to engage with the EU market.

Exporting is now going to be more procedural than before and no one in their right mind would suggest that this is welcome but how much impact will this have on trade? As expected there has been a fair degree of media speculation both in terms of the immediate effects and longer term. There has been a flurry of activity around Dover seeking the extent of consignments and lorries being turned away. As expected there were some teething problems but significantly (and maybe because of the low traffic) this isn’t a story that some hoped for.

In regards the longer term there has been speculation and social media posts from fairly high profile commentators that’s export procedures will be a “disaster”. In fact I had an online exchange with the author of this book regarding the documentation chain. To a receptive tribe of followers he made the bold claim that the export procedures will kill trade with the EU. He used “machine goods” as an example.

Machine goods. Presumably relatively high value lowish volume. So we have the scenario. Uk Business receives an order form France for say 100 units at £2k a time. Does the uk business export or does it refuse because of paperwork? I think the answer is clear because I’ve yet to see the export documentation clerk have the final say on whether a £200k order goes ahead. Or even a £200 one

He retorted that the French importer would just buy elsewhere to avoid any paperwork they have to incur. Remember that we are talking “machine goods”

Didn’t he realise that such transactions are generated by quality branding and price before a little bureaucracy? In fact isn’t that the case with most transactions?

Our biggest export market is a mountain of bureaucracy and seemingly unnecessary forms (almost certianly far more taxing than to the EU) but somehow we’ve managed to trade impressively with the USA for as many years as you would wish to count.

Frankly the author of this seemingly well received and widely distributed book hasn’t a clue about business. He doesn’t understand that sales and sourcing drive business, not a little additional paperwork and on this basis I would heartily recommend that you avoid his drivel like the plague