The Scandinavian owned, pan-European company is seeking contact centre agents and telephone negotiators for its tele-contact centre in Worthing, West Sussex, with what is believed to be 30 jobs made available immediately and a further 70 jobs spread out over the next 12 months.

Director Emma Frost said: “BCW Group operates across many areas, including offering client’s complex outsourcing procedures such as invoice administration, invoice purchasing, debt purchasing and debt collection….We achieved Investors in People accreditation in July this year and have invested heavily in our staff rest and breakout areas to create a highly positive working environment.”

Gothia Financial Group (operator of BCW) in turn employs 900 people across Europe and is the largest company of its kind in the UK following the merger with Gothia UK last year.

The growth in credit management services and credit management organisations is in part, attributed not just to the growth of debt recovery services in the wake or midst of a recession, but also down to the changing dynamic of UK small business finance and the availability of traditional borrowing. The year on year increase in invoice finance services and service providers in turn, leads to a scale up of the outsourced credit control provision that often accompanies some invoice finance facilities.

If you are in the market for invoice finance for the first time, or are considering shopping around for the best deal for you, Factoring Finance Ltd have a UK wide, broker network, able to source the best deals from many funders. We are independent, and as such are not tied into using any particular funders but the one that is right for your business.

Most people will remember the adverts for “The bank that likes to say Yes”, but that phrase has somewhat disappeared. It is doubtful that a new ad campaign will surface stating “we are now the bank that would like to say yes, but the computer says no” or “the bank that likes to say yes, so long as you put up your home as excessive security and pay over the odds in terms of interest”. No matter how much truth the above statements have, they just don’t have the ring to them.

On a serious note, and there is nothing as serious to a small business owner as losing your business and your home as a result, the banks have obviously become more protectionist and their own interests at the moment (in propping up the balance sheets) are not in sync with small businesses looking to raise finance. We keep on hearing from the banks about UK small business not having an appetite to borrow, but its all relative in so much as businesses may have an appetite to borrow, but not on the terms that the banks are offering.

Priced out of the market

Many small business owners, whom lets not forget, collectively have a £24bn mountain of late payments owed to them, are simply being priced out of the traditional bank loan and bank overdraft markets. It is not uncommon for the banks to ask for security well in excess of the amount being borrowed, which previously would have either been unsecured in any case, or secured only on a business asset. Now for something as small as an overdraft for one month’s business turnover, small business owners are being asked to put up personal guarantees and a charge over the family home. All the while being charged an interest rate in the high teens or even the twenty’s, which is some 20-40 times the Bank of England base rate.

Who would have an appetite for that type of borrowing?

Working capital remains one of the most crucial elements to business survival and whilst there are some businesses that are simply not viable for any form of business finance, there are tens of thousands who have a viable, profitable and growing business, in need of working capital funding to facilitate that growth.

It stands to reason that if you offer some of your customers, 30, 60 or even 90 day invoice terms that the money spent in fulfilling that sale is effectively taken out of the business for the duration. In a growing business, or perhaps seasonal businesses with short windows of high sales volume, the lag between cost of sales and being paid can be at best, detrimental to exploiting maximum sales, growth and profit, but at worst, place a strain on the working capital and plunge the otherwise viable business into negative cash flow.

When the banks say No

Increasingly the banks are shying away from traditional borrowing, even for viable businesses unless excess security is offered. As such, when the banks say no, one type of funder has been saying yes, and with increasing popularity.

Invoice Finance products such as Invoice Discounting or Factoring, which are sometimes known as ABL or Asset based Lending products are where the business needing finance, offers up an asset, in this case an outstanding customer invoice, as security and receives an advance from the funder against that invoice.

The advance is typically 75-90% of the invoice value and given typically 24-48 hours after the business submits the invoice to the funder. The typical charges against the funds advanced are somewhere between Base rate + 1.5% to 3.5% but these will vary between funders, and the individual business requiring the invoice finance. However, Factoring Finance are independent brokers so we can find the best deal for your business and not just in terms of fees, but with industry specialists best suited to your business if so required.

Small Business Finance Outlook

Since the credit crunch the banks have been pulling out of unsecured business borrowing, easy credit is gone and this is only set to continue and escalate as the banks prop up their balance sheets.

ABL used to have an association with companies in trouble among many business owners, but in fact, it’s often the best form of finance for a growing business. Given the reduced security requirements, it is far more likely to be available and offered to a small business and is flexible in so many ways that now even the banks are actively pushing their customers towards this type of facility, and some have also entered the market for themselves.

For more info on invoice discounting and invoice factoring or a quote on the best deals from numerous small business finance providers, pick up the phone or use our ‘Am I eligible’ tool via the site for further details. Factoring Finance has a UK wide, independent broker network able to source the best deal for you and as such, we are not tied to any one provider, or bank!

In the current climate too many business owners are somewhat grateful just to have a finance facility in place with their bank and the concept of challenging the cost is a no go. Banks have somewhat of a stranglehold and are the proverbial brick wall when it comes to haggling on cost.

So whilst the market for bank borrowing is uncompetitive, resistant to change, poor value for money etc, what about factoring agreements and other invoice finance facilities?

Most factoring and invoice discounting deals tend to be written around a 12 month term in any case so the framework and ability to switch to a cheaper or better facility is a whole lot easier and already lends itself to the insurance renewal model, with an annual review. In our experience – spanning more than 30 years – factoring agreements signed in the early years of a company trading can be comparatively more expensive as to when the customer has more trading history with which the funder can base their risk analysis on.

So it pays to shop around year on year.

Other factors such as, projected sales being exceeded or possibly not met, the industry/sector you operate in performing better or worse, or becoming more or less riskier to operate in, coming out of or into a recession etc etc will all have an effect on the rate you the customer will ultimately be offered. Either way, sometimes, all that is needed is a little fine tuning in order to get a) a better rate for your invoice finance facility, or b) a better packaged facility more suited to your business model.

If you are in the market for invoice finance for the first time, or are considering shopping around for the best deal for you, Factoring Finance Ltd have a UK wide, broker network, able to source the best deals from many funders. We are independent, and as such are not tied into using any particular funders but the one that is right for your business.

Domestic Factoring, where the business and its customer invoices are both UK based rose by 7% in Q1 2011 compared to Q1 of 2010, worth some £4.5billion alone in Q1.

Domestic Invoice Discounting also rose from Q1 2010 from £41.2billion to £47.5billion, which is a year on year rise of 15%.

Export Factoring, where a UK business gets advances on invoices to non UK businesses, also saw an increase and although the figures advanced are lower in value at £408m for Q1/2011 they represent a 50% rise against the same period last year of £272m.

Other increases were evidenced in Export Invoice Discounting, which was up 22% in Q1/2011 versus Q1/2010 from £2.6billion to £3.2billion and Import Factoring was also up an impressive 36% over the same period last year with an increase from £168m to £228m.

Total Sales for the Invoice Finance industry therefore rose by 15% from £48.6billion to £55.9billion for Q1/2011 compared with the same period in 2010.

Outlook

Considering the mantra from the banks is the UK business has no appetite to borrow the figures do suggest that perhaps not all press statements from the banks’ spokespeople should be taken at face value.

It is out understanding that its not an appetite for borrowing in its entirety per se, but more a lack of appetite for borrowing that is perhaps perceived as too risk adverse for the banks, uncompetitive and not in the interests of the customer.

UK small businesses are going to need funding, be it for short term cash flow, re-investment, capital expenditure or growth and in the current climate, more and more businesses are forgoing the traditional bank borrowing with increased costs and security demands, and voting with their feet and seeking alternative funding methods.

The Preston based supplier of commercial catering and refrigeration equipment supplier said it is now aiming for turnover of £10m over the next two years, which is an increase of 25% after securing a £2.5m funding package, including invoice finance.

The company was founded in the early 1990’s and whist being a distributor for brand names like Sanyo and Whirlpool with products such commercial microwave ovens, fat free fryers, and dishwashers, the firms’ founder and managing director Pratap Gadhvi said the business was affected by currency fluctuations at the onset of the recession as stock that had been purchased in advance was left unsold.

However, he said that the finance package – which comprises a £1.6m cash flow facility and a £400,000 loan should provide it with the liquidity to take advantage of emerging opportunities.

Gadhvi  had said that “Our banking partner was largely unsupportive of our situation….”, and that “More than 60 per cent of our business is done between April and September, so it was also important to ensure cash flow was boosted all year round.”

Having worked on deals like this for many many firms over the years it is great to be able to hear about or comment on stories of success and positivity in an otherwise gloomy economy. That the core services we provide was at the heart of the story was an added bonus.

With a recent survey and report stating that trading for small and medium-sized firms in the north west has worsened in recent months, with 48 per cent of business managers and owners saying it has become ‘very’ or ‘incredibly’ tough, and 45 per cent of respondents thinking the effects of the recession could be felt for three years or more it is encouraging to see firms like Valera reporting optimism.

Late payment problems and unsold stock levels during slow trading periods affect thousands of North West businesses each and every day and its products like invoice factoring, invoice discounting and inventory finance that can restore balance to a firms’ cashflow during slow or seasonal periods.

Factoring Finance Ltd have more than 30 years experience in finding the best invoice and asset backed finance solutions for UK business.

With an extensive broker network and access to sector specialists, Factoring Finance can start unlocking the potential in your business, free up the cash in your outstanding invoices and leave you to put more time into your business.

Factoring Finance Ltd are independant brokers and as such, we are not tied to any one Factoring, Invoice Finance, or other Commercial Finance provider. While we are based in the North West, our broker network extends across all of the UK.

Its something that small business owners have known for some time but the main difference with those surveyed is that they reflect the demographic where access to finance is typically the least difficult to secure.

The survey, conducted in May 2011, revealed 60% of the 51 company owners (i.e. respondents), 80% of which have a business with turnovers in excess of £10m, believed it would be difficult to obtain capital throughout 2012. For such company’s, whom have audited accounts, trading history and as the survey suggests with “most successful entrepreneurs” we can deduce that if those who are deemed “successful” are finding it difficult, what about those not quite there yet?

The majority (68%) of those taking part in the Investec research said they had plans to use external sources to raise capital over the coming year, with over a quarter (26%) planning to raise in excess of £10m, two thirds of which (i.e. 26% looking for funding) said they planned to use bank loans and overdrafts, the remaining third turning to venture capitalists.

Ed Cottrell of Investec was quoted as saying “Our findings suggest that many of the country’s leading entrepreneurs are feeling optimistic about their future prospects, but these could be put in jeopardy if they cannot obtain access to capital,”

Funding Outlook

We at Factoring Finance have had some major successes in arranging client deals (both invoice discounting and invoice factoring) for small and medium sized businesses and as the piece suggests, (although limited to 51 business owners) the finance environment remains challenging to say the least.

As reported in another of our blog posts, our experiences seem to mirror those of the Invoice Finance sector as a whole when looking at the latesest ABFA (Asset Based Finance Association) data, so it is encouraging that although the UK small business sector is still finding it difficult to secure traditional forms of borrowing, that there is some slack being taken up by our industry.

For more details on how Factoring Finance can help you avoid late payment problems, cash flow difficulties, and improve your debtors book with, Invoice Finance products such as Invoice Factoring & Invoice Discounting or other Commercial Finance and/or Credit Insurance, simply get in touch and we’ll do the rest.

But the banks however have pointed out that they are not to blame, and that the Q2 Project Merlin figures will improve the situation for UK small and medium sized businesses.

According to a report from the British Bankers’ Association (BBA), lending decreased by a total of £2.5 billion in June and on the back of poor figures which resulted in Project Merlin missing its Q1 target by £2.2billion.

Under the Project Merlin deal, Barclays, Royal Bank of Scotland, Lloyds, HSBC and Santander promised to collectively lend £190bn to businesses in 2011. Whilst Q1 figures disappointed, at the end of June they had lent 49% of the £76bn promised to SME borrowers this year, and 53% of the overall annual target of £190bn.

So where did the appetite suddenly come from?

According to the June report which pointed out that rather than then banks refusing to lend money to small businesses, it was actually a case of the reverse with the fault in low lending figures a direct result of businesses no longer approaching banks to try and borrow money.

David Brooks, statistics director of the BBA, said: “Businesses, as has been seen elsewhere, are concerned about the economic outlook and, in weathering difficult conditions, they are putting off expansion or investment plans and limiting borrowing”

Up to the end of June, – which at last calculations was still a month in Q2 – the standpoint of the banks was that ‘UK businesses have no appetite for bank borrowing’. Yet in just a few weeks, newly released Project Merlin figures contradict the Banking Industry’s report?

Has UK small business suddenly found its appetite to borrow?

Not according to other research they haven’t, and in fact they never did have a reduced appetite for borrowing in the first place. One such survey by GE Capital showed that across the UK, businesses would like to invest a total of £75 billion in 2011 in order to grow.

The decline in lending  before the latest Merlin figures could be due to several factors such as the increased cost of borrowing for smaller businesses or the increased demand by banks for excessive security demands.  The former is the most likely factor as respondents to the GE Capital survey stated that they found borrowing too expensive.

In a survey amongst risk managers from banks across Europe, analytics provider FICO has seen a forecast that the “credit gap” for small businesses remains but it is easing.

Mike Gordon, Managing Director at FICO EMEA explained:

“Credit managers in the UK showed slightly better expectations for small business lending. While the credit gap for small businesses persists, the forecast is much smaller than five months ago, and both the demand and supply forecasts are higher. This suggests that government stimulus to encourage growth in small business activity coupled with government encouragement of lender programmes to fund small business borrowing are having an impact. The lenders we work with are striving to close the gap yet are mindful of the risks that face small businesses in the slow-growth economy.”

So if the banks were steadfast in that they were not to blame for Q1 figures, perhaps they too were not affected by repeated Government pressure to deliver on Project Merlin? Perhaps they were not also buoyed by more public anger and mis-trust over the PPI mis-selling scandal, or increased lending costs to businesses amid an all time low BoE base rate helping them recapitalise?

So presumably, this surge in lending is by pure coincidence and the banking industry won’t therefore claim any credit for the turnaround as in their words, they were not responsible for the poor Q1 figures so there was nothing to turnaround?

Whilst many will be buoyed by the Q2 Merlin figures, there is still half a year to go so it remains to be seen if the banks can be true to their word and maintain the lending figures through Q3 and Q4?

Borrowing is essential for business, as it is for any household. Whilst cash flow in both may change throughout the year  the lower availability of credit has meant that UK small business and households have not has the same access too, nor same costs as before in respect of their borrowings. Something which can be put forward as a reason for the growth in demand for payday loans with 2500% APR’s.

Cash flow aside, large purchases like cars for households or plant and machinery for business can’t normally be made without the use of more structure finance. Perhaps why leasing figures (both commercial and private) have both increased in recent years over purchase?

But when it comes to operational and day to day funding and finances, Invoice Finance products like Invoice Factoring or Invoice Discounting are brilliant at reducing the effect of 30,60 or even 90 invoice terms where there is a significant gap between good and services out, and monies inward.

However, whilst invoice finance products, which are closely linked to sales and turnover rates are great for managing cash flow, they are not suitable for a start up where there isn’t any invoices yet.

This is where a great deal of support is needed as for the private sector to pick up the slack in the jobs market as a result of the UK’s austerity measures, new businesses need to be created. And how do you start a business and invest in stock and equipment without access to more traditional forms of borrowing like loans?

Invoice Finance is a vital life line to many businesses but all of the customers of factoring providers have one thing in common. They all have outstanding invoices to put up as security for which monies can in turn be advanced against. Start-ups don’t have this luxury so let’s hope that new entrepreneurs are given the right levels of support in order to get their new ventures of the ground!

King said of the problem that it was one for Government to remedy and not the central bank, and whilst he was downgrading the UK’s growth forecast for 2011 from 1.8% down to 1.5%, that there was also no monetary policy steps that would yield an improvement in credit access for small and medium sized enterprises.

The statement comes just before the Bank releases its second quarter results for the Project Merlin deal, which aims to increase the amount of capital lent to businesses, particularly SME’s, by agreeing lending targets between the Government and the five biggest high street banks.

Mr King was quoted saying “This is a problem of the structure of the banking system, and questions about the allocation of credit….”, he added “The amount of lending by the banking system to non-financial companies is falling. It’s been falling for some while, and it’s still falling. This is a natural consequence of the deleveraging of the banking system.”

If those comments didn’t say the exact opposite of the British Bankers’ Association (BBA) stance then the following somewhat clarified Mr King’s stand somewhat resoundingly.

He continued, “But let’s be clear about it, it is falling; and particularly problematic for small companies because at least big companies can go to the stock market to issue equity…… Small companies don’t have that opportunity, and they’re suffering as a result.”

The fact remains that bank lending is down, and for many, Mr King’s account will resonate more than the banking industry’s stance that lending is down due to firms having no appetite for borrowing.

On the subject of ‘appetite’, various polls, surveys and reports over the last year rather than portraying a lack of appetite for borrowing, suggest if there was a lack of appetite, it was for the overpriced facilities which have effectively priced SME’s out of the market.

Although the rates at which the banks themselves source their monies has remained at an unprecedented low, business loans and business credit cards remain uncompetitive, often with rates reaching into the 20% plus bracket. This low availability of credit, and high interest rates for what credit is actually available has created a gloomy environment for small businesses trying to get access to finance.

So what about the term ‘appetite’?

The stance from the British Bankers’ Association (BBA) in justification for June’s banking report which showed lending had decreased by a total of £2.5 bn, is that small businesses do not have an appetite for borrowing?

David Brooks, statistics director of the BBA, said: “Businesses are putting off expansion or investment plans and limiting borrowing.”

But the BBA take on the figures is obviously going to be made with a bit of positive spin surely? Perhaps a better viewpoint of the term ‘appetite to borrow’ can be via an example, as the BBA standpoint fails to take into account the rising costs of bank borrowing despite an all time low in interest rates.

An individual may have an appetite to watch Premier League football but not an appetite to pay £1200 per year for a season ticket and so some may have more of an appetite to stay at home and get Sky Sports or ESPN or go to a pub and watch the Premier League?

The BBA take on the word ‘appetite’ would suggest that in this example, no one other than those with season tickets have an appetite for Premier League football!

Tell that to the millions of Sky Sports and ESPN subscribers, and that according to YouGov research, over a third of British adults aged 18 to 34 are planning to watch this season’s English Premier League on TV outside of their own home, ie in the pub.

There may not be an appetite for a small business loan for £10,000 at 18% APR, and  putting up the family home as security in order to get it, but that doesn’t mean there are no people with appetites to borrow £10,000 to put into their businesses?

The figures show that despite the implementation of Project Merlin, small companies are still not getting the financial support they need to grow, employ new staff and become established. Project Merlin missed its first quarterly lending target for 2011 by some £2.2bn, showing that the scheme is currently failing to provide the financial support SME’s require.

Invoice finance industry to pick up Project Merlin failings?

It is clear that the times ahead are not going to be plain sailing for the UK’s small and medium sized businesses and whilst the market for traditional bank borrowing has taking a further dive, the invoice finance industry is in contrast, continuing to grow.

Many UK factoring providers are reporting very strong rates of growth and new client take ups, and in turn ramping up their operations to meet demand.

Whether the invoice finance industry, in it’s supply of factoring and invoice discounting can plug the multi billion pound gap left by Project Merlin remains to be seen, but there are certain factors involved that put the industry in a firm footing to fulfil those obligations.

One of which is in respect of trust and transparency. Unlike the banking industry, the invoice finance industry doesn’t have market wide mis-selling scandals and the like marring its reputation. The providers are smaller and with competition amongst providers in abundance, which in turn serves the best interests of the small business, there are many deals to be sought from shopping around, unlike in the market for business loans from the UK’s banks.

Factoring Finance Ltd have more than 30 years experience in finding the best invoice and asset backed finance solutions for UK business.

Factoring Finance Ltd are independant brokers and as such, we are not tied to any one Invoice Factoring, Invoice Finance, or other Commercial Finance provider. While we are based in the North West, our broker network extends across all of the UK.

How would half a day of lost management time per week affect your business?

Chasing invoices can be a lengthy process, and the problem is somewhat compounded in small businesses (SME’s) whom cannot fall back on a dedicated accounts department in their larger competitors. Spending, or in many cases, wasting over three hours each week chasing payment settlements can significantly affect a business’ output and restrict its cash flow, often with firms’ own bills and liabilities potentially falling behind as a result.

The Bacs research also showed that over half 53% of UK SMEs have experienced late payment problems, which is up from 45% in June 2010. The average amount owed to these businesses is now a staggering £27,000, which is paid an average of 39 days later than the agreed payment terms.

So putting this into context, if a supplying small business offers its customer a 30 day invoice settlement period (a very common length) then at present, the Bacs research indicates that UK SME’s are being made to wait and chase their outstanding invoices for a period of time in excess of an already generous length of invoice term. When the supplying firm issues the invoice and gave 30 days, how many of those firms counted on the fact that the real settlement period would be closer to 69 days and not 30?

Could your business cope if all your 30 day invoices weren’t settles until day 69?

Businesses wishing to minimise the risk of knock-on effects on cash flow as a result of late payments are advised to employ a credit insurance product to safeguard against delayed invoices and potential customer insolvencies.

Martin Walmsley, head of debtor insurance at Lloyds TSB Commercial Finance, commentingon the Bacs research said: “This recent research from Bacs further highlights the problems facing SMEs regarding late payments.

“It can be difficult for a company which only has a handful of employees to keep on top of outstanding invoices. This can mean important growth strategies are neglected, as time is spent on the phone or drafting letters to debtors instead.

“Ensuring cash flow is not adversely affected by late payments, a credit insurance policy offers peace of mind for growing businesses which are concerned about the impact of overdue bills.

Indeed, for SMEs whom are worried they are spending too much time chasing invoices, factoring may also be worth considering. Factoring, a form of invoice finance, also has an in-built credit management provision which is ideal for smaller firms that do not have a dedicated accounts departments.

At Factoring Finance, we have over 30 years of experience, an extensive UK wide broker network, and unlike the high street banks, are not tied to any one provider. The net result is that we can source the best insurance products and factoring deals through our independent network and get the deal that’s right for you, and not a banks balance sheet.

Founded in 1968, Bacs, the not-for-profit, membership-based industry body is owned by 16 of the leading banks and building societies in the UK, Europe and US. Since its inception, over 84.9 billion transactions have been debited or credited to British bank accounts via Bacs. And in 2010 almost 5.7 billion UK payments were made this way with a total value of £4.06 trillion.

For more details on how Factoring Finance can help you avoid late payment problems, cash flow difficulties, and improve your debtors book with, Invoice Finance such as Invoice Factoring & Invoice Discounting or other Commercial Finance and/or Credit Insurance, simply get in touch and we’ll do the rest.

The research, conducted among 300 small and medium-sized importers and exporters across a range of sector, found that 47% of companies trading internationally have reported growth in the export side of their business in the past 12 months.

A total of 44% have maintained export sales at the same level, while 9% have noticed a decline, the study from Bibby found. Andy Meadwell, international trade finance spokesperson for Bibby Financial Services, said: “The UK government has placed a huge emphasis on the role international trade will play in driving the UK out of recession and reducing national debt.”

He added: “With the latest Office of National Statistics figures showing a contraction in GDP of 0.5% over quarter four 2010, and Britain’s trade deficit reaching a record high towards the end of last year despite a growth in exports, there is an obvious need to drive international trade even further and promote the price competitiveness of UK goods and services on the world stage.”

However, more than a third (34%) said overseas red tape was a barrier to trade, with 18% viewing issues associated with securing new business as being a main factor.

What are Export Factoring solutions.
Export factoring is a specialist facility offered by some invoice factoring companies to help finance exports and international sales. The process usually involves a third party finance organisation in the country in which you are doing business in order that payment can be collected as per the normal arrangement with invoice factoring facilities.

Not all invoice factoring companies have access to Export Factoring but Factoring Finance Ltd has an extensive and independent UK wide broker network including Export Factoring specialists.