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Tuesday, May 26, 2009
Asset Based Lenders are those that traditionally base their lending on sales receivables (debtors / sales ledger) finance products - factoring / invoice discounting etc., however it is often the case that their offerings go much further than just that, but the receivables is normally a prerequisite.
There is certainly an increasing amount in the press, and other evidence, to suggest that despite all the Government incentives and the real need for lenders to be sensible, they are simply not giving what might be quite good propositions any consideration at all. A survey from our friends at Venture Finance recently suggested there had been an almost three fold increase in the number of businesses being refused credit by banks and other traditional lenders, now reaching 58% of all propositions.
Our own experience is similar, with the need for bricks and mortar security seeming to be a prerequisite before a discussion can even begin!
It seems that the press from the "independent" ABL's is that they are gaining from this market, and picking up new business which may have otherwise gone to the banks. By independent I mean those ABL's that are not bank branded, as even some who are not these days are ultimately owned by the banks. Our experience certainly has been that bank owned and branded ABL's have similar criteria to the banks themselves, the independents are often much more creative. However, that said we have seen even their lending criteria tighten and a much stronger desire to see protection of some description or other (security, credit insurance, etc.).
What does this all mean? If you need funding for your business you may have to think a bit outside the box, but also accept that you not only need a first rate case, with a strongly supported business plan etc., but that you may have to put your house on the line to make it happen. There are though alternatives to the high street banks if they refuse to play ball.
Interesting times ...
Sunday, May 17, 2009
Thursday, May 14, 2009
The media, and especially the press, are usually full of negative news: murders, attacks, economic failures etc. It may be that experience has indeed shown that negative matters are of more interest to readers.
Even if this is so, I believe that at least one page of positive news would be welcomed by readers. Readers would turn to this page - even if they found the negative stuff more interesting.
Editors might agree with me. Then they would ask where positive stuff is to come from. Negative stuff comes easily from the police or the law courts. But where is the source of positive stuff.
So my suggestion is that someone sets up a ‘Positive News Agency’. This would be a news agency like Reuters. It would collect positive news and make it available on demand.
With all the doom and gloom from the press this would make such a welcome change!
Tuesday, May 12, 2009
I posted an entry a short while ago about the new Prompt Payment Code ...and what a nonsense it is. That aside it seems smaller businesses are beginning to suffer in the hands of larger customers.
Recently UK retailer Argos was reported to have unilaterally doubled the time it takes to pay it's suppliers from 30 days to 60 days and in addition to deduct a 4% settlement discount. For a retailer this must be nothing short of obscene as they will not be giving any credit will they! So why are they making their small suppliers suffer other than to improve their own cash flow. It really is appalling.
Having a long standing client who supplies the major food retailers we have seen who is funding their growth in recent years by the increasing terms they are unilaterally taking. Fortunately our client has the ability to withstand it, but many won't.
Research from HSBC suggested that smaller businesses are being forced to wait up to six weeks after the agreed payment date to receive their cash! Payments owed had risen 40% in a year, and 64% of business are saying that managing cash flow is their biggest challenge. Tenon Recovery said that 3 out of 5 of UK business were struggling with cash flow issues because of late receipts from their customers.
If you are dealing with the big boys then there is often little you can do about having terms imposed upon you. It is a case of take it or leave it. However, in our experience you do need to make sure you have an extremely efficient credit control process. The trick appears to be when dealing with the bigger companies is to have a really intimate knowledge of their systems and then follow what they want to the letter. If that means that certain codes or numbers need to be quoted on your invoices then make sure it happens without fail, if it means certain supporting paperwork needs to go with the invoice (like a delivery slip or the like) then ensure it always happens. In most cases it is a waste of time sending the invoice if you are not getting it right.
Then make sure that you have someone who is clearly responsible for building relationships with the accounts payable people at the customer, and that they are in constant touch and ensuring invoices will be paid on time before the payment date comes around. This proactive approach will undoubtedly pay dividends.
I do sometimes wonder how many of the statistics about the delays by the large companies mentioned above is due to the system not being played right. However, there is no doubt at all that they are abusing their position and strength.