Zahawi and Greensil troubles

It is probably fair to say that Zahawi’s tax issues are the headline news at the present time and rightly so. It’s quite extraordinary that someone who has pretty unimaginable wealth would seek to, let’s put this politely, get into a tangle over his tax affairs which very understandably, will be seen as deliberate tax evasion by voters.

My view is that he should go immediately. How much more damaging in these difficult times could this be for the Government and the leadership?

However this shouldn’t allow his role in Greensil to be overlooked and the Times today boldly reports that he has deliberately misled and lied to officials over messages he exchanged with Cameron over the CBILs lending through the disgraced lender.

Anyone who has read the excellent Pyramid of Lies will wonder what incentivised Zahawi to promote such a shambolic lender and their clients, most pertinently Gupta and failing group. We need to remind ourselves that these people are supposedly running the country

Talking of Gupta, one of the highlighted elements in the tale was his use of small “audit firms” run by overseas nationals on the edge of industrial estates with barely a website or any profile. These “firms” disappeared once the heat was on. This I highlight because I have seen the exact same scenario detailed on a set of filed accounts of a fairly high profile business that I have deep scepticism about.

Thats another story which I believe will develop in time but for now, Zahawi should go and quickly

Small funders struggling?

Coffee with a very well connected and lovely industry insider yesterday revealed a few suspicions i have been having about the market

At least two lenders are empty of funds with them being totally unable to access funding themselves. One is pretty high profile and certainly would need a boost very soon given its heavy recruitment and payroll developed over the past year. They are continuing to advise clients that their applications will be dealt with “imminently” despite the pot being empty. Not their only example of over promising. The other is one i’m attempting to engage in a deal which is very frustrating with much time already wasted

This is so frustrating. I haven’t directly named them but I will give one example and name Select invoice finance who when they do not have the funds available tell you straight. That generates goodwill from me because my time isn’t wasted. Lenders can be victims of their own success and of course need to source more back up. This is almost certainly the case with Select but in other cases you have to wonder whether the business model, poor risk assessments and the overheads are the problems?

I suspect the two i’ve indirectly mentioned aren’t the only players struggling and there has been a further exit from the asset finance market by Channel Capital in recent weeks (for differing reasons admittedly)

Fortunately with the signs that the economy might not be experiencing quite the downturn many expected, these issues may ease but lenders should be more straight with their clients and brokers. Its surely not too much to ask

Fintechs vs Banks. The battle continues

A few years back I was sat at a dinner next to a very arrogant retired banker who was pronouncing to the table that all Fintechs would fail because “they don’t know what they are doing”. Someone asked which banks he had spent his career with and without the slightest minuscule element of self awareness, he proudly told us it was with HBOS and Lloyds. He was of course, an absolute gent or something similar

The other side of the coin is a somewhat hysterical and goggle eyed rant from one of the most high profile Fintech Banks (clue in picture above) on Radio 4 this morning about how they were up ending the whole traditional banking industry with their shiny new methods. It felt like being shouted at by a preacher. Again, any element of hubris was entirely missing which is a pity given this banks catastrophic handling of bounce back loans.

Neither side can claim to have all the answers and they would do well to remember that. Established banks have disgraced and frequently bankrupted themselves over the past few decades and many fintechs are supported by balance sheets which no fintech, with their naive reliance on algorithms, would lend against

Collecting a difficult debt. Some tips

Over the past few weeks I have been assisting a lender in collecting a particularly worrying and difficult debt from the debtor of a client of mine. I would like to think they took some of my old credit management advice and we talked it through regularly and we succeeded. Against expectations, the debt was paid in full this morning

In a way, it was quite an interesting experience delving into to old retained skills and it made me consider a few rules when dealing with tricky debtors. Some of these are perhaps obvious but always worth remembering

1. If a promise of payment is made, get in in writing. At that point the debt cannot be disputed by the debtor and immediate action can be taken
2. Ensure you “know your debtor”. Up to date credit assessment is key and its also vital to avoid overreaction against a strong company that is simply somewhat incompetent
3. Always keep notes. Every conversation.
4. Confirm by email exchanges and promises made. This informs the debtor that you are watching carefully
5. Aways press for commitment and dates. A payment “soon” is a worthless promise
6. Never make threats you cannot keep. An example is a threat to “wind up” the business. Thats expensive and has to be seriously evaluated. There are ways of saying the unsaid and that is often more worrying for the debtor
7. Never ever lose temper and rant. Less is more
8. Consider enlisting advice of a professional (such as myself of course). One false move can be expenisive
9. If taking or threatening legal action use only specialist lawyers but be very wary of the cheap options promoted online. They are little more than call centres

I think thats all that springs to mind for now but always happy to assist

Is this lender lying?

Once in a candid moment, a business contact of mine told me that they lied continually to clients to win business. Im sure there is some Trump inspired manual that suggests this is the way to go but surely doing so simply tarnishes reputation and in terms of wining clients, reputation is all? In this particular case, I know for a fact that many do not trust and steer well clear.

This week an excellent new client of mine in professional services was told the following..

For their proposed MBI, they could borrow seven figure numbers on these terms

• no security other than the target business
• 6% APR

My client’s current turnover is < £1m with tight margins. Lovely people and i’m enjoying finding them other forms of finance but they have been convinced of the above terms. The lender is clearly trying to boost its profile

Naturally there is nothing in writing and maybe I will be proved wrong and such an offer will be forthcoming which would of course boost my clients growth potential

The lender is certainly not a high street bank but somehow they are offering a rate which just about undercuts the HSBCs of this world. As for the security, the proposal is that they will take ownership of the business once it cannot maintain its loan repayments. Anyone else see a significant problem here?

It surely doesn’t need spelling out that if a business cannot repay its lending obligations then the business itself is almost certainly of little value and frankly not worth taking ownership of, even before the clear on going difficulties that such a takeover would entail

Make up your own mind whether this lender is telling the truth of just trying to boost its pipeline but what I do know is their reputation precedes them and they have misled many potential clients before

It’s simply bad practice and unethical to promise something you simply cannot deliver and there is too much of it.

Hard sell? No thanks

A conversation last week reminded me how off putting and counter productive persistent “hard selling” is. I had gently brought up the possibility of certain services perhaps being engaged by a lender I know well and it was like a dam burst. Having thought the matter through, I had concluded that the services were not required from the lender at this stage but there was a (slim) chance that it could be in future and a relationship could be built

Instead I was practically berated about an area of judgement which I knew particularly well. Intelligence was insulted somewhat

So the result is I go on defensive and where does that leave my enthusiasm for an introduction?

The trouble is that in some quarters it’s forgotten that in this business we are all circulating amongst professionals and business owners who have been around the block somewhat. Certain Asset finance lenders are still geared towards selling a vital product as if it was Pet insurance or Time shares in Ibiza. As well as contributing to an industry image which could certainly be improved upon, its simply, to use a familiar current expression, “reading the room”

Business Financing Predictions for 2023

My annual ritual is to share my predictions for the forthcoming year. It’s a good way to concentrate the mind and plan accordingly but like all predictions, some may come true and others will not. I concentrate on business finance but that is of course influenced by wider trends which are harder to predict and unfortunately not particularly positive at the present time. No matter and heres a random selection

1. Will a major bank finally entirely absent themselves from the invoice finance market? This has been predicted time and time again by many in the market and with RBS withdrawing a significant product and another within the Big 4 seemingly invisible in the market, the rumours will persist. My prediction is that there will not be a radical exit but a continuing gradual move away from the invoice financing
2. The demand for invoice financing will be slow. Many in the industry believe it will spike when CBILS and Bounceback lending looses its impact but i’m less sure. In my experience, invoice financing is largely driven by Start ups (relatively), growth and MBIs. Business sales and purchases remain bouyant but business expansions and start ups are surely going to be sluggish for a some time.
3. As I have recently blogged, I believe that insolvencies will not rise at the rates many are predicting.
4. The issue of the Government lending schemes and the waste through lack of checks on borrowers will continue to be news and I predict there will be a number of high profile cases which will not reflect well on the current PM
5. The RLS loan scheme (a further version of the CBILs lending) will launch belatedly in January but the number of “signed up” lenders has reduced considerably and I hope my prediction that the lending will overly limited will prove to be incorrect. I sense very little enthusiasm from the lenders and this could fade away like the EFG scheme
6. A major “fintech” lender will collapse under the weight of badly underwritten lending. Some of these lender’s balance sheets make for horrific reading and whilst I believe they are a very welcome addition to the market, the belief that you can overturn the established principles of lending is simply wrong
7. Given a couple of bafflingly dreadful rebrands in the Asset Finance Market, marketing agencies and their dismal suggestions will be rightly sidelined by the industry
8. Commercial mortgages will prove more difficult to source. There is likely to be a downturn in the overall property market and this will of course impact. Additionally property backed business loans will become a little harder to complete and source

Not a pretty picture overall but it would be foolish to assume otherwise but the overall consensus from economists will be that there will be upturn later in 2023 and its worth remembering that many of the direr predictions about this winter both in resources and commodity prices have not come to pass. A good example is Gas prices which are apparently now at lower levels than pre invasion

Either way, if it means the end of Putin then it’s a price worth paying. The world would undoubtably be a better place with his passing.

Happy new year