Invoice discounting blog news and views from the world of invoice discounting

Statistics recently released by the factoring and invoice discounting companies’ trade association showed that despite everyone claiming a shortage of working capital the value of sales financed via invoice discounting dropped by over 11% from £44.8 billion to just under £40 billion with the number of companies using the facilities dropping by 5%

Posted under Invoice discounting

The invoice discounting marketplace seems at best to be marking time with the discounting companies and brokers reporting far less activity than in recent years.

Most of the lack of activity can be put down to the recession as companies are not looking for finance for growth if they see little prospect of achieving any growth in the current economic climate.

Many of the invoice discounting and factoring companies have either stopped taking on new clients or else are being far more selective in what they do take on with many clients that would have been gratefully accepted this time last year now being refused facilities.

In addition the attrition rate of existing clients has grown enormously with many not managing to ride out the recession and ceasing to trade or else they have been informed that they no longer meet the new revised criteria and are being asked to move on.

Those discounting and factoring companies that were more careful in the business that they put on in the past are consequently suffering the least at the moment whilst the big problems are being suffered by those who adopted the “pile them high and sell it cheap” philosphy in the last few years.

Luckily the funding providers that Invoice Discounting UK deal with have always had a good reputation for service levels and therefore client retention and are consequently suffering less than most others.

Posted under Factoring, Invoice discounting

According to recently released statistics by the factoring and invoice discounting trade association the number of companies taking advantage of these facilities dropped ever so slightly in 2008.
In view of the fact that most invoice discounting companies claimed to be taking on quite a number of new clients in the early part of 2008 we assume that the attrition rate in the second half of the year must have been well above average.

The average debtor days of both factoring and invoice discounting clients worsened by 10% which would have been responsible for an extra £1.5billion of funding provided by the discounters just to fund this slowdown in the payment cycle

Posted under Factoring, Invoice discounting

Enquiries for invoice discounting are running at record levels thanks to the banks’ unwillingness to lend on overdraft and whilst they are trying their hardest to steer the business to their own invoice discounting subsidiaries many companies are now looking to brokers like ourselves to ensure that they are getting the best deal.

One of the reasons that prospective companies are moving away from the bank owned discounting companies is the extra charges that the banks are sneaking in to bolster their profits. Setup fees which in the past have been nominal and supposedly to cover the cost of documentation have been increasing with RBS Invoice Finance trying to impose a setup fee of £1,500 on a company turning over just £300,000pa which equated to 0.5% of the year’s sales.

Another additional charge that the banks are starting to levy is a renewal charge, often at 1% of the facility.

These charges in addition to the banks hardening of attitudes towards concentrations and credit limits are just some of the reasons why brokers like Invoice Discounting UK are receiving more and more enquiries in the first couple of months of 2009

Posted under Invoice discounting

An article in the Financial Times last week stated that the government had been holding talks with The Asset Based Finance Association (ABFA) about the possibility of the government offering guarantees to the banks in order to allow them to continue to offer invoice discounting.

If true one has to wonder if this is really necessary as invoice discounting is supposedly far more secure than traditional overdraft lending which is why the banks have promoted this form of finance in recent years. They have been pushing their customers towards it on the basis that the security is that much better.

The ABFA is the trade body who supposedly lobbies on behalf of the factoring and invoice discounting companies which comprise it’s membership and if the government do take on board this suggestion it will be of huge benefit to the bank owned discounters who will benefit enormously at the expense of the independent sector to whom these guarantees will probably not apply.

 Would the ABFA lobby on behalf of a minority of it’s members to the detriment of the majority?

Posted under Invoice discounting

Invoice discounting in the UK has grown tremendously in the last few years due in no small way to the impact of the Brumark decision in 2001 when the banks realised that the fixed and floating charges that they used to secure overdrafts with did not place them at the top of the pecking order as they had thought but further down the chain.

The banks reaction was to start desperately transferring as many of their customers as they could from traditional overdraft lending onto invoice discounting or factoring where not only was the security better but the rewards tended to be higher too.

All of the banks marketing material states how flexible invoice discounting is as a funding tool as the availability of working capital rises with increased sales. In practice though it’s very different and now that the country has hit hard times the bankers are reverting to type and looking to restrict the amount of funding available through invoice discounting thus negating one of the plus points of the facility.

Let’s hope that the banks don’t make life too difficult for their invoice discounting clients  but even if they do the independents seem to understand the product better and so far haven’t been applying artificial restrictions so they could possibly benefit at the expense of the banks.

.

Posted under Invoice discounting