Bounceback frauds. Are the sentences enough?

Im far from one of those who screams for heavy sentences for every one of life’s transgressions but punishments must surely be a disincentive to potential offenders?

A couple of Bounceback fraudsters (in the classic manner that has been repeated all across the UK) have been given “suspended sentences” whilst attempts are “made to recover the money”

Am I alone in thinking that the fraudsters have come out on top here? Is that too cynical? Sure a suspended sentence is going to resonate across personal records and (I think) credit ratings but it’s hardly their worst nightmare?

The whole “Bounceback” scheme was shockingly and naively ill conceived by you know who. The upside of this story is that prosecutions are happening but the sentences have got to hit home. Although i’m far from an envious type, it hasn’t been a lot of fun having to listen to boasts (some first hand) of of ripping off the taxpayer for significant amounts with the collusion of less than ethical Insolvency practitioners

The good news is that the likely incoming Labour government has pledged to go hard after these cases but we need the punishments to kick in too. Fraudsters need sleepless nights

On a political note, this is a winner for Labour. A PM who refused to continue the small £25 a week extra allowance to desperate families was completely blasé about throwing money out the window to the assorted seedy thieves that were gleefully ripping off the tax payer

What do I do?

Recently a contact asked me for samples of interesting facilities that I have completed in recent times. There are few duller posts on Linkedin and elsewhere than those from brokers boasting about this or that deal they’ve completed but there is also the risk that some readers may believe I do little more than write a blog

So here goes..

1. World-wide recruitment £120m turnover

This is a particularly substantial example which I have been working on for around 8 months. They were being funded with a big four bank and receiving disinterested service. A familiar story and the challenge was finding a lender who could fund their US and Canadian entities as well as UK and Europe. Canada was the priority and we explored the market as well as building up a really close relationship with the client. I have some experience of the US and Canadian markets, which was useful but I also had to build a number of new contacts and re-explore the variances in the way business is carried out over there (with some surprises uncovered) To cut a long story short, we have found a lender who covered all areas and my client is now delighted with the service across the pond. However there were a couple of hitches with the Uk and Europe and because this is on going, I will refrain from disclosing details but suffice to say, a solution thats best for the client was negotiated

2. Local recruitment turnover £300k

Many small enterprises are prey to the numerous lenders and brokers who mis sell their products. This client was trapped in a shocking arrangement with a lender I have no respect for. The lender also made threats about continued funding and renewal of contract. Without going in to too much detail, we made firm representations and granted some free legal opinion which enabled my client to find a quick exit from their lender. They are now happily funded by one of the most ethical lenders in the market. The satisfaction here is enabling someone at the start of their journey find the right solutions to thrive. And she will

3. Aerospace Manufacture. £30m turnover

An interesting element here was the nature of the industry. Bizarrely some lender should not fund at all within this sector (no Boeingf? No Airbus?) and other had an issue with a small element of my clients manufacturing being geared towards missile technology. In this industry there are aways surprises and new challenges. The key here was building up string relationships between the existing management and the new South African Investors as well as the appropriate lender. This took nine months to complete and we did generate competition but the key here was finding then right professional personal relationship as well as price. The account director from then lender was excellent and that is a significant factor

Ulster Bank. When’s this going to stop?

As so often the case (the Post Office scandal), the Times has been diligent in uncovering potential malpractice within. the financial sector. Unfortunately the story is behind a paywall but the essence of the claims are summarised below

Last month The Times revealed claims by Ian Tyler, the former group head of capital at Royal Bank of Scotland, that NatWest had “covered up” an alleged accounting fraud at Ulster Bank. Tyler and others said this had resulted in business customers being loaded with “hidden” liabilities against their accounts and forced into the bank’s notorious Global Restructuring Group.

Clearly there will be more developments and in fact I have been rather late picking this up given that the above was published September last year but the same question keeps re-occurring

When is this going to stop?

Businesses are naturally going to be taking on liabilities through lending but why do certain banks seem hell bent on destroying long term trust for short term gain? Sure its a small division of a large bank an the story will slip under most peoples radar but it still chips away at the overall image and trust

And that is no use at all to the borrowers, the lenders and of course, us brokers

Conflicted brokering?

Im increasingly coming across Invoice finance brokers who are also offering “insolvency services”. The latest example is someone I know well and trust. There are also invoice finance “brokers” who are directly employed by Insolvency Firms, which is perhaps a slightly different and arguably more controversial arrangement but ill address that another time

The problem with the former is that two different products are being offered which are contradictory. Finance should be geared to the prosperity of the business or at least, their longer term survival. But how does that sit with comfortably with the promotion of Insolvency (or the even more dreaded “turnaround”) services?

Im not saying that someone would deliberately hard sell a finance product riddled with costs and restrictions which will inevitably generate Insolvency business. Perish the thought..

In fairness, I wouldn’t expect that of my contact at all, but others?

Ive always avoided knocking rivals but its also important to stress ones services and the fact that they are offered without potential conflict of interest.

Trust has to be paramount. Brokers need to be clear headed and focused on only what is the very best for the client

Insurance. Beware of these products…

For those running small businesses, there are numerous insurance products available, some of which are linked to finance and others not so. It can be quite a confusing market, especially when. certain items are given the hard sell by “brokers”

I will state my position here. The only insurance product I assist with is Credit Insurance, which I co-ordinate through a broker I’ve known for many years. Having managed policies for many years in my credit management days and knowing this is a competitive market, I feel comfortable doing so. Between us, we can offer the right advice on which policy is best and whether its really a requirement or not

A client of mine has paid for an expensive policy to cover personal guarantees he’s signed for various loans. I hasten to add that I didn’t sell him this policy and I also note that these policies are being sold pretty vigorously by many intermediaries

Thats a warning sign in itself.

He has now found himself in a position whereby he was hoping to make a claim. He has no chance at all as he’s acknowledged himself. Clearly the small print should have been examined in more detail, but from what he’s told me, the criteria for a successful claim are extraordinarily difficult. Yes, I will be checking some details here but its pretty clear why this “product” has been sold hard isn’t it?

The Post Office. What does this tell us?

As someone who has followed the revolting Post Office/Horizon scandal since the first story first broke in Private Eye and has been extensively covered by the Times since, I am more than delighted that the apparently superb and certainly game changing ITV Drama Mr Bates versus the Post Office (which admittedly I haven’t watched yet), has jolted the establishment into action. However there is still a long way to go and questions to be asked

Firstly my feelings that the retribution for those responsible should be swift and brutal and if that sounds like something out of the Sopranos, then it is meant to.

The wider issue is that of the clear inaction by those who are supposed to be looking after the publics interests but are purely looking after their own. One of those involved was well known during his career in advertising (an industry I was worked in for many years) for being particularly self serving but its also clear that rather than “rock the boat”, there were plenty who were craving their salaries, honours and invitations to the right dinner parties more than preventing the biggest mis carriage of justice the UK has seen and one with horrendous personal consequences for many

You wonder how they slept at night. You wonder what how it would feel to be devoid of any conscious or morals at all?

Another point is that some have mistakenly attributed this scandal to a “privatised industry” mentality whilst ignoring the fact that the Post Office is state owned. Certainly private industry (notably banks of course ) have treated their clients with contempt on many occasions and those involved here were not exactly free wheeling entrepreneurs. They are the epitome of the “corporate creep”

Interestingly the coverage, aside from Private Eye, of the scandal was the most extensive, by quite a substantial margin, in the Times and least (also by quite a margin) in the Guardian. Make of that what you will

Another point is that we are probably becoming too reliant on IT without human input. A reasonable human would have quickly worked out that a very high percentage of Postmasters were not suddenly initiating a particular co ordinated fraud. This point is well made my Hugo Rifkind in the Times today where there have been similar scandals (although arguably a lot less serious) in Michigan and The Netherlands. In a world where the drive is towards worshipping at the alter of AI, this needs a rethink

This story has a long way to run and whilst vengeance isn’t always the most healthy of human impulses, its one that many will gladly see enacted here

Interest rates to fall. But how soon?

The above graphic certainly illustrates how rapidly interest rates have risen in the past year and certainly this has affected the appetite for borrowing by not just mortgage holders, but SMEs too. Last year was a very good year personally for my brokering ending with a very substantial arrangement across USA, Canada and Europe for a truly excellent client but overall there was a sense that businesses were holding back from investment or just straightforward day to day cash flow borrowing (not always the same thing)

The good news is that interest rates seem destined to fall fairly quickly and fairly soon. Goldman Sachs have predicted significant cuts in May but with inflation falling faster than expected, I’ve heard predictions of sooner from good sources within the media. Lets hope so

This will be welcome news but as mentioned previously, too late to save this administration in the next election. Jim Callaghans perceptive “sea change” pre Thatcher quote comes to mind. Nothing will swing the electorate back to a deeply disliked party

As an aside, for this who have an interest in the effect of interest rates on economies, I can seriously recommend this fabulous read. An entertaining an engrossing read on the history interest rates? An oxymoron? No and to give an example, who in our line of work could resist wanting to know the psychology and disfunction (far from the only example) behind the Japanese lenders lending at lower rates to technically insolvent businesses than to profitable ones?

2024 and what changes might we see?

It appears to be pretty certain that we will see a Labour administration before the end of the year. Sunak and Hunt have arguably steadied the ship quite competently after the incompetence of Truss and the shabbiness of Johnson but for the public it is, rightly, not enough.

The failures can be debated but its more constructive to imagine what a Labourt administration and specifically Rachel Reeves may well bring.

In the wider scheme of things, she is not a chancellor to be feared by believers in the free market. to her credit (but not Keir’s) she refused to serve under the toxic Corbyn leadership and whilst she can bang on a little excessively about her experience and credentials, there is not doubt she has them. And she’s very smart indeed

Overall economic policy will be steady but we can expect closer ties with the EU. That should be welcomed whilst it should also be appreciated (and will be) that Brexit has been nothing like the disaster many predicted.

A priority here should be a strong push to alleviate the needless bureaucracy that entangles small business exports and imports and my prediction is that with increased good will from the EU as well as a realisation that we are a hugely significantly market for them and that “we are where we are”, this may well be an early win

Reeves has made many promises to encourage small businesses with investment and this should be welcomed. The current administration has been shown to be too “free market” orientated to buy into this and Sunak has too often given the impression of someone who knows his way around money but not actual business and genuine enterprise. He was a banker of course

That was perfectly illustrated by his quite ludicrous Bounceback loans. There was of course room for lending in this arena but fraud was simple and extensive. It is an enduring disgrace that the lack of controls for this lending were naive in the extreme. Nor has there been much effort by HMG to address this and its very welcome that Rachel Reeves has made this a highlight of her agenda and rightly talks passionately about the scale of this shambles.

Coming down to more micro concerns which apply to lenders, there is always a fear that Labour will be regulation hungry and this could apply to business lending. Personally I see little prospect of that in the short or medium term simply because other issues will be of considerable more significance. But I suspect there will rightly be scrutiny of the major banks and their policies and attitudes.

An interesting year ahead