Ukraine

My communications steer clear of politics and I think few would have views on Ukraine that veer away from those any civilised person would hold. Fair to say though that the whole tragic scenario has once again proved that the far right and far left in this country and elsewhere are indistinguishable from each other and have been fully exposed for what they are.

I will avoid any discussion on the impact on financing for now but it could be rightly claimed that this was particularly distasteful in a major newspaper

Theres a time and place for everything and it is certainly not the time to discuss the effect of of the bombing of Ukraine on UK house prices

Invoice and asset finance market observations

These periodic updates are usually the posts that get the most traffic to my blog but sadly there isn’t always an awful lot to say. On occasions the market moves strongly in certain directions and at other times its relatively stable but even in stable times there will be small indicators.

The key to brokering is understanding who does what and to what extent. It’s a complicated puzzle and rewarding to unravel. The difference between one offering and another to a client can be enormous and we do of course work with the clients best interests at heart. Or at least some of us do

I have certain observations about certain lenders and as ever I will not name names. We do have to have some trade secrets of course

One fairly high profile lender has certainly appeared to pull up the draw bridge, having rejected a proposal of mine that other lenders are fighting hard to win. Another is suffering discontented staff who are simply feeling overworked. I can vouch for that given that my excellent extremely diligent contact has decided to move on citing this very issue. He’s moved to a bank which is seemingly reaching out to re enter the market but will, in my opinion, need to loose its habitual aversion to any level of risk

Fintechs appear to be a little quieter than before but with the Government lending coming to a close, there will soon be an upsurge of new lenders offering conventional lending. And I can certainly pinpoint some gaps in the market

Equipment lending has taken a bit hit with the Active TV “fraud” of course and lenders are naturally more cautious about verification but the market is still active

Other lenders are reviewing their offerings having come out out of the CBILs driven slumber.

There is certainly appetite out there

Nat West branch closures. Why these are significant?

Why is this round of closures (32 branches) possibly more significant than previously seen?

Look at the list.

These are largely in largish city and town centres and even includes the iconic branch of the ancient Child and co. Another highly recognisable branch would be Piccadilly, the closure of which was surely unthinkable just a few years back. Windsor loses its branch as does Chelmsford but most significant for me, so does Twickenham, my home town. These are significant commercial centres.

Twickenham hosts the four major clearing banks and this is the first to close. Its certainly going to leave significant hole in the high street (although it was not as prominent as HSBC and Barclays with their landmark building) and its unlikely to be the last closure

A brokers dilemma. What would you do?

Recently a client presented me with a problem. Its not one i’m expecting any sympathy for but did present a difficult dilemma

This client was seeking invoice financing. They had already discussed requirements with a larger brokering firm but how thorough those discussions were is very open to question, as I will come to

They had two debtors. Both well rated but one was overseas. They also had months where one client or the other was the whole months turnover and this is significant

They also were unsure whether they were actually going to need to use the facility at all. Again this is significant

Also the director I was dealing with emphasised that highish prepayments might be required and also he was unhappy with a set monthly fee for something they might not use

Unfortunately he was a little disengaged withe the process and despite suggestions, engaging the other directors proved impossible but my solution was clear

Single invoice discounting whereby there are no set monthly fees with a guarantee that the invoices would be funded in full without ledger restrictions was obvious. Yes its more expensive when used continuously but with doubts about utilisation, it made sense. There was also no commitment to a contract

Progressing to a full facility should have ensured 100% allowance for a single debtor and 100% for “export”. Thats essential and achievable. A prepayment of 85 or even 90% could be sourced. I believe I could have found this

My contact told me he was “outvoted” by other directors for a facility that was 60% allowance for both exports and each debtor as well as a pretty high monthly minimum fee and a not generous 80% prepayment

The lender will offer what they can perhaps but where on earth was the broker advice here? It was clearly non existent and yet they will pick up commission for what exactly?

I had to point out that they were agreeing to a contract which could in fact cause them serious problems and they would be tied into but the dilemma was this…

If I pointed out why, then they would say thank you and simply renegotiate with the lender (who I know well and I believe would have given ground) the rewards would remain with the original broker who frankly contributed absolutely nothing

I always try to do the best for clients but there are times when it has to be caveat emptor

Re-branding invoice financiers. Does it pay?

On a trip to Newbury Races this weekend, I had the pleasure of catching one of the relatively new Hitachi trains from Paddington. Aside from train travel is fo me, by some distance the most enjoyable mode of transport, the beautifully smooth train was proudly carrying the logo of its manufacturers, Hitachi

Hitachi are of course involved in Invoice and Asset finance or I should say were involved. I wrote about the changes a couple of weeks back and because of an error, I have now deleted the post but an overall point remains. Hitachi asset finance was in fact taken over by Mitsubishi and that led to the rebrand

It would be fair to say that the rebrand has had a mixed reaction in the industry but regardless of what anyone feels about the name, a high quality brand name has been lost

When visiting clients, they will ask who is involved in the sector. The big banks are recognised but not particularly liked (I am being polite). Other lenders have a poor profile on reputation and smaller independent banks will often have a reasonable name recognition but trumping them all are the manufacturers. These were GE, Siemens and Hitachi

Businesses trust manufacturers and especially those with the profiles of the aforementioned. This gives these lenders a strong initial advantage

That advantage is lost if they are not recognised. Yes it can be described as xxxx owned by xxxx but its not the same.

In this case I have asked why the Mitsubishi name wasn’t used instead of the rebrand. Answers were given but I wouldn’t be at all surprised if there a change of heart some time in the future and the advantage of brand Mitsubishi is used utlliised

Rebranding is always a risk Factor 21 rebranded as Advantedge and that works because the previous name was not very inspiring and rather limited. Another lender has told me that they should have rebranded with an abbreviated version of their name so as to shake off a tarnished past reputation. A third lender currently has a name for taking on “difficult” debt at high prices but is apparently trying to expand into more conventional lending and if committed (i’m unsure), should consider rebranding

Ultimately a lenders identity is some distance from being the most important factor in deciding between facilities but its a factor that cannot be ignored

Bouncebacks. Private Eye expose the real scandal.

Readers of Private Eye will be well aware that it goes the extra mile in exposing incompetence, corruption and whatever else exposes the establishments many failings. Bouncebacks are rightly the latest target and there is a very revealing piece in this weeks edition

The text is not available online but anyone with any interest in this issue will surely pick up a copy

Here are some highlights.

11% of Bouncebacks loans are expected to be fraudulent. Thats 160000 “loans” totalling £4.9b

PWC won a contract to “run the loan scheme”. They also charged £1.5m for “fraud analytics”. I think its fair to say that wasn’t very effective and the quote in Private Eye goes further

The ex treasury minister, Lord Agnew, describes the British Business Bank as “woeful”

And so on. There is so much more

So why the concern from lenders and brokers such as myself?

Lenders were hit very hard by the loans. Existing financing facilities were “taken out” by cheap Government lending which was completely contrary to the objectives of the scheme. This was not fraudulent but extremely frustrating. Businesses that had virtually zero negative impact from Covid were obtaining cheap unnecessary lending and of course that was too often used for purposes other than business requirements

Perhaps even more insulting to the industry was that seemingly no advice was taken from asset lenders on the risks involved. If it had been sought, then nothing like the level of fraud would have been seen. As a judge quoted by Private Eye said when summarising a deep level of fraud with bounce backs “even the most basic of checks would have revealed the fraud”.

The Government leant on the British Business bank but even then, surely they could see that the advice was poor?

This was an entirely predictable outcome and the issue not be allowed to rest