Business Money
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Introduction
I had better come clean right now, get it off my chest. I have a passion for business finance. A banker for 28 years, founder in
1993 of Business Money magazine, the industry journal in commercial finance and banking, it is a charge I cannot deny. For the last 14 years I have compiled the annual independent report on the UK’s invoice finance sector. Given that this medium of business finance, with its exceptional flexibility and capacity to adapt the needs of the businesses it supports, was employed by the management teams of 42,000 companies to finance £212bn of sales in 2010 maybe it is time that this success story was heard.
Businesses go through various stages as they evolve and, especially for those that are growing fast, their working capital needs to grow too. If Arnold Weinstock left an abiding lesson in the annals of business it is that big companies can strong-arm smaller suppliers into accepting lengthy payment terms. Raw materials have still to be accessed, wages must be paid, energy bills and rent covered too, so what is a business to do? Misty-eyed memories of accountants of old taking the client for a pint with the bank manager and walking away with an overdraft facility owe much to the time- lends-enchantment school of fiction. I can recall reading file notes repeating lectures on over-trading, knowing your place in the scheme of things, and bemused business owners wandering away wondering where the devil they would find a venture capitalist. Even if the bank wanted to offer overdraft facilities against outstanding invoices, I did it many hundred times so I know, the world has moved on. The Brumark ruling, a case originating in New Zealand and being finally ruled upon by the Privy Council in 2001, undermined the integrity of a bank’s position when holding a debenture over the current assets of a company. The various Basel provisions on capital allocation have impelled banks even further towards the invoice finance route for working capital facilities.
Business Money – RSM Tenon
And specialist invoice finance operations do this so much more efficiently than the banks ever could. Advance levels are far higher, control works much better for both client and lender. The UK leads the world in the huge choice of invoice finance houses, in product innovation, and an adaptability to an ever changing marketplace.
Invoice finance is a route to take a business from one stage in its evolution to another, it is an essential bridge across a capital gap, and the numbers employing it successfully can only raise their eyes to the skies when some clown of a journalist pens a piece suggesting that they are stupid for being fobbed off when something better was there for the asking. The odd accountant is not entirely guilt free in this respect either though for them, sharing a rest home any day now with Colonel Blimp surely beckons, and bemoaning together the loss of the empire, just as soon as those whipper-snapper partners have raised enough to buy him out.
I have to thank Carl Jackson of RSM
Tenon for financing Receivables 2010, my fourteenth annual review of the UK invoice finance sector, and for sharing in my enthusiasm for publishing a great success story to a wider audience. The UK’s SME sector has never had a
greater choice of business banking facilities or ways of financing a growing business. It is up to SME owners and their professional advisers to get up and go find them but that is what the spirit of business is all about. Spoon feeding is for other sectors of the economy.
And if an invoice financier calls you up seeking to help one of your clients grow, your practice will benefit too. Our research suggests that of 15,000 accountants with business clients, only 2,500 are well-versed in the various shades, and the best use of, invoice finance. I hope this book offers a helping hand to many more.
Editor June 2011 1
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