Jump to content
House Price Crash Forum
Sign in to follow this  
Sheer Heart Attack

Lenders Are Even More Risk-averse Than 6 Months Ago

Recommended Posts

We're currently setting up an invoice factoring system for the business.

For those who are unaware of what invoice factoring is, it's very short term loans for companies based on invoices. So, let's say you issue an invoice for £10,000. The factorer will pay you £8,000 straight away when you've issued the invoice. They'll then pay you the balance (minus their fees) when the customer settles up.

He showed us our credit rating. For years, it had been below average risk. Now, it's above average risk. We've not yet published our accounts for the terrible period during which I joined this site - the last accounts on record show a healthy 6-figure profit.

The guy was telling me that lenders are far more risk-averse than they were just 6 months ago. He said the feeling around the company was that companies are now properly hoarding cash (that's certainly true in our case - I pity the companies that don't have cash reserves and are highly geared).

He said that the amount companies were drawing on their factoring facilities had shot up, and the growth of their loan book had slowed dramatically since January (although it is still growing). Also, the average payment time has gone up from 38 days to 47 days and the number of companies taking out insurance on their factoring facilities has shot up.

This is a proper crunch. The guy who came down said gloom is all around and he can't see an end to it before 2012.

Scary stuff.

PS - Connection to house prices? If decent-turnover businesses have trouble getting finance, imagine lending £200,000 to a punter who wants a house in a time of major economic slowdown/recession.

Edited by Pacific State

Share this post


Link to post
Share on other sites
Good from the horse's mouth post. Someone will pipe up with a "This should be in anecdotals!" or "Why no explanation for the edit??"

I was thinking "anecdotals" when I typed it!

And the edit - to add the PS to give it some sort of tenuous link to house prices!

Share this post


Link to post
Share on other sites
why

have you thought about invoice discounting - you get the cash but keep control of the collection of debts

have seen lots of business pushed into invoice factoring by the banks and it often ends badly

We've traditionally always collected money before we do the job.

We have next to zero experience, even after many years, in chasing debts because we grant so few credit facilities to customers. Added to that, I wouldn't really know how to base a judgement on creditworthiness based upon accounts.

Have you had a rough experience with factoring? If you have, I'd appreciate you sharing that with me.

Share this post


Link to post
Share on other sites
We've traditionally always collected money before we do the job.

We have next to zero experience, even after many years, in chasing debts because we grant so few credit facilities to customers. Added to that, I wouldn't really know how to base a judgement on creditworthiness based upon accounts.

Have you had a rough experience with factoring? If you have, I'd appreciate you sharing that with me.

Use a Debt Collection Agency ;)

Share this post


Link to post
Share on other sites
We've traditionally always collected money before we do the job.

We have next to zero experience, even after many years, in chasing debts because we grant so few credit facilities to customers. Added to that, I wouldn't really know how to base a judgement on creditworthiness based upon accounts.

Have you had a rough experience with factoring? If you have, I'd appreciate you sharing that with me.

not me but l know lots of clients that have - pushed into it by the bankers - usually - i suppose there will be some good factoring companies out there but i dont know them

why dont you ask to speak to some of their current clients before you take the plunge

also speak to your accountant - if hes any good and doesnt creep round the bank manager as he gets a few referrals

Share this post


Link to post
Share on other sites
not me but l know lots of clients that have - pushed into it by the bankers - usually - i suppose there will be some good factoring companies out there but i dont know them

why dont you ask to speak to some of their current clients before you take the plunge

also speak to your accountant - if hes any good and doesnt creep round the bank manager as he gets a few referrals

Thanks for that. We've deliberately chosen a firm to do this who is not our bank. Our bank is Barclays and I can't help thinking they'd grant it only if they took away our O/D facilities. True, we haven't used the O/D since 2004 but it's nice to have it there.

We're going to use one whose name might remind you of cows. Have any of your clients used them, or have they all been pressganged by the banks to use their facilities?

Share this post


Link to post
Share on other sites
Guest KingCharles1st

Interesting-

A friend of mine owes a sum of money to Vodafone, and the "joined at the hip" collection company who do the chasing, just last week offered her an instant 25% reduction to pay the balance off in full.

THis doesnt seem normal operating procedure for debts collecting agencies - they normally try and add 25% ON TOP for every call they have to make!

In a nutshell- everybody is starting to hoard cash, and try and get whats out there before it is all gone.

Share this post


Link to post
Share on other sites
Interesting-

A friend of mine owes a sum of money to Vodafone, and the "joined at the hip" collection company who do the chasing, just last week offered her an instant 25% reduction to pay the balance off in full.

THis doesnt seem normal operating procedure for debts collecting agencies - they normally try and add 25% ON TOP for every call they have to make!

In a nutshell- everybody is starting to hoard cash, and try and get whats out there before it is all gone.

Interesting story, KingCharles1st, but I don't think it is the shocker it could be.

My brother defaulted severely on a loan of £5,000 to the bank in 2004. They phoned me up as the guarantor and said the debt would be written off if I paid £4,000 instantly.

The loan company sold the debt to the collection company for a fraction. They would have made a profit from my settlement.

Share this post


Link to post
Share on other sites
Thanks for that. We've deliberately chosen a firm to do this who is not our bank. Our bank is Barclays and I can't help thinking they'd grant it only if they took away our O/D facilities. True, we haven't used the O/D since 2004 but it's nice to have it there.

We're going to use one whose name might remind you of cows. Have any of your clients used them, or have they all been pressganged by the banks to use their facilities?

I found that when I traded with both an Overdraft and Factoring that the combined cost exceeded my net profit. I knew it would, but I judged it was necessary, to continue to have sufficient working capital.

It was the worst thing I could have done as it ate up my retained earnings very swiftly and, as the recession in question lasted longer than I estimated it would (how does anyone really ever know?), we were soon about to trade insolvently and had to call in the receivers, leading to losses of jobs I should have culled a year before, but I was too soft back then.

I am sure you have done your own homework, just pointing out how quickly things can turn around.

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...
Sign in to follow this  

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 399 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.