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Big Business and Late Payment

According to new research, small businesses are waiting more than eight weeks after they are due. What’s more, small firms are having payment terms dictated to them by larger businesses who are regularly violating their payment terms of their sales. 44% of SMEs experiencing late payment say that big businesses are the worst offenders, according to the survey by Bacs Payment Schemes Ltd.

It was also revealed that the national debt owed to small firms due to late payment now stands at over £30.2 billion. The average wait for payment is 38 days, or eight working weeks, with the average business waiting for more than £31,000 in overdue payments. 1 in 10 is owed £50,000 or more – so there are definitely huge sums of money involved.

Small companies in the north of the country are owed on average £39,000, almost double that of small businesses in the south who are on average owed around £23,000. Retail and distribution businesses are suffering the most with late payments, with nearly 60% waiting for overdue payment, with average outstanding payments of £43,000.

“Waiting eight working weeks after a payment is due before receiving the money could be catastrophic for vulnerable companies, particularly at a time when the economy is struggling and cash flow is key,” said Mike Hutchinson from Bacs. “We urge SMEs to look at where they can assert some control, automating payments wherever possible to save valuable time and administration costs, and remove some of the stress on the business and its owner.”

With Business Minister Michael Fallon naming and shaming those big businesses who fail to deliver on promises to combat late payment, the Prompt Payment Code will hopefully improve the situation .

Businesses Behind PPC

Minister Michael Fallon is on the war path against late paying businesses, naming and shaming the worst offernders in a bid to make sure more FTSE 350 members are signing up to the Prompt Payment Code. Many small and medium businesses have come out in support – hoping the PPC will put pressure on big businesses to pay on time in order to keep SMEs going.

Around 69% of business owners and finance directors in the Hilton Baird Collection Services annual Late Payment Survey think that Fallon is on the right track in threatening to name and shame businesses. Those ignoring requests to join the code are burying their heads in the sand and many businesses think that this needs to stop.

There is widespread support for the PPC – this comes after businesses had to wait, on average, 21 days past the end of their payment terms during 2012. This was only an average figure, and many businesses were often kept waiting beyond this already long period of time in order to get their hands on the money they were owed by customers. This was an increase of 4 days from 2011, showing the problem is getting worse – this highlights the escalating problems with late payment for many SMEs13% of businesses were forced to write off more than 5% of their annual turnover over the past twelve months, while 38% classified more than 10% of their debts from customers as over 90 days old. 

Managing Director of Hilton-Baird Collection Services, Alex Hilton-Baird, commented, ‘Businesses are firmly behind Michael Fallon’s attempts to encourage the country’s largest firms to improve their payment performance. Whether this will have any effect remains to be seen, however, as it isn’t just large corporates that are culpable. Late payment is occurring right the way through the supply chain.’

‘These numbers are simply unmanageable for the vast majority of businesses, particularly when you take into consideration the range of other pressures on their cash flows at present. In many cases businesses are having to wait more than 60 days, sometimes more, to be paid after providing goods or services. Given this, it is obvious why the economy is caught in a state of flux.


Manufacturing: Growth of Turnover through Invoice Finance

Doom and gloom about the current economic climate is everywhere, but there is some good news and small signs of recovery. According to a survey by Bibby Financial Services, an invoice finance provider to SMEs, the manufacturing sector is starting to perform once more. This not only shows that the economy is perhaps starting to get back on track, but also shows the importance of invoice factoring in that recovery; all the companies interviewed were invoice finance customers.

The Business Factors Index produced by BFS shows that of 4,000 clients, manufacturing businesses are performing the best and have improved turnover significantly on recent years. This sector is at its highest level of output since the start of the economic downturn in 2007. This is based on business turnover, one of the key indicators of growth and one of the areas that invoice finance can help to improve. The quarterly average output jumped from 114.2 to 122.8 in Q1, showing there was not only an increase in confidence amongst businesses but also within their customer bases.

However, though this is all good news, the index also revealed that the manufacturing sector is actually a bit of a mixed picture. Despite increased output, many businesses are still being conservative about growth and expansion, with most appearing to be digging themselves in for the recession long haul. Almost a third of them believe the UK economy will not recover adequately for at least another five years – as a result, 63% are planning to cut costs and overheads to maximise their chance of survival.

This all shows that even if output is increasing, the bigger economic picture is still having impacts on business confidence. Invoice finance can help to remedy this to an extent, helping firms access better cash flow to enable them to maintain growth – all without taking on huge debts and interest repayments.

Internet can Level the Business Playing Field

The internet is not only benefiting the access to funding for businesses, but it’s also helping to level the playing field giving small businesses a better chance of competing with their larger rivals. Online platforms for finance are growing and helping to widen the options available for businesses when looking for funding, letting independent providers of invoice finance, peer to peer and crowd funding platforms compete with traditional bank lending. Similarly, having an internet presence for your business itself can boost opportunities for growth, as well as letting small firms compete with the big ones.

According to research by the University of Southhampton, consumers were asked to compare the website of large and small firms, without first knowing the size of the business. In a lot of cases, customers weren’t able to judge the size of the business from the website alone – and, more importantly, when asked to choose between the two businesses 2 out of 3 people chose the smaller firm.

Not only this, but the research showed what people most responded to in an online presence. 81% of customers were attracted to authenticity, with easy to read descriptions and a simple approach being important. 71% wanted to get a sense of the people behind the business before making a purchase. Clear contact details were also a big factor (77%), with 64% valuing good reviews and customer feedback.

This shows how important it is to have  digital presence. Not only does it mean more people will be able to see your business, but it also means that you’ve got the opportunity to get business from customers who may otherwise have opted for the biggest and most obvious company. This renews competition between big and small companies, levelling the playing field like never before.

This all shows that if your business is looking to make the most of online opportunities for improving cash flow, it’s just as important to improve your own digital presence as it is being aware of the internet funding options that are available to you.



Lifting the Lid on SME Funding

The SME Finance Monitor survey has today published data that lifts the lid on the state of SME funding in the UK. Surprisingly, the outlook on funding was not entirely bleak with the majority of loan requests and overdraft extensions being approved in the final quarter of 2011.

Doom and gloom?

The independently conducted survey concluded that 79% of overdraft extensions were approved, and 63% of loan requests were also granted. This seems surprising given the prominence of SME funding issues in both the press and parliament.

Some background is needed here: there were far fewer applications in the final three months of 2011 than the equivalent time period in 2010. This may be because of the overwhelmingly gloomy outlook coming from many sectors.

Many business are put off from funding applications due to the expectation they will be unsuccessful. The survey found that business with fewer than ten employees felt particularly downbeat.


The 2012 Budget will detail George Osbourne’s long awaited credit scheme for SMEs, although this scheme has already been hit by delays. However, Downing Street remains positive about its unveiling later this month.

There are also some entrepreneurs who are stepping into the funding void. New banks such as Aldermore specialise in lending to SMEs, and have tailored packages that may be more favourable than those offered by the big banks.

Equally, new business models have become increasingly successful. The Funding Circle pools the money of its investors, who can specify which SMEs that they lend to in order to maximise their return.

The Funding Circle has lent more than £25 million since it was founded in August 2010. With pay outs averaging around £40 000, this adds up to a lot of approved loans. It is however picky about the SMEs it deals with, and with so many companies in need of funding £25 million is fairly small fish.

Factoring and invoice discounting have been tipped to grow in 2012, and are excellent ways to get business funding during such a competitive time.


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Dip in international trade

In today’s new China has shown a dip in export and import, which, due to the economic circumstance, is bound to make consumers particularly nervous.

China, the biggest trader in terms of high-tech products shipped across the globe, has taken a real hit from some of it’s biggest clients in the USA and Europe.

It puts China on the tough year ahead list, despite there being continual trade, is has dropped off dramatically.

In the UK, many companies cut their international trade and instead, invested in ways of producing products on British soil. Machinery which could produce exactly the same quality as the Chinese businesses we purchased and run in the UK, this minimised staff costs and running cost, as well as the costs of shipping and charges.

Many companies, rather than looking further afield are having to keep production costs to a minimum which means keeping things in-house.

Shipping isn’t always straight forward. There are charges and a guarantee needs to be drawn up in the guise of a Letter of Credit to guarantee payment from clients.

There have been cases in the past that companies haven’t adhered to letters of credit and thus many British and European companies have lost a lot of money from sending products and materials.

So, what happens now? We sit tight and prepare for the rough ride. We can’t deny 2012 will be a tough year for business. Where some fail, some flourish.

It’s sometimes difficult to stay positive at times like this, but at the end of the day, if your business can survive in these hard times, it will flourish as time get better.

There is plenty of support and if you need to start purchasing international products or trade overseas, there are people who can walk you through every step.

Select Factoring



New Year- New funding

If you’ve tried everything possible to get some extra funding for your business, you may feel that you have exhausted all of your options. It may not be a case of funding but you need some financial capital up front that enables you to pay your staff, expand, purchase machinery, purchase vehicles and take on new staff.

Let 2012 be the year that you discover the incredible alternative funding solution-Factoring.

You may have never heard about Factoring, or you have but know little about it, that’s where the team at Select Factoring step in with all our knowledge and years of expertise in this particular area.

Factoring is based on the capital tied up in your businesses invoices. Normally invoices are sent out and you might not see the payments from 30 to 90 days, which is a bit of a drag if you need to purchase more materials or other items.

Factoring releases the capital tied up in your invoices and rather having to wait up to 90 days you can have the money in your account within 24 hours.

Now you may be wary of the cost of Factoring, compared to the interest on a business loan, factoring is a tiny percentage and the cost is taken from the final payments of your invoices.

It’s a very flexible form of business funding, you can choose to use the capital in all or simply a few of your invoices, you can also choose to continue chasing your clients or allowing the factoring lender to chase them for you. Generally as a rule you will receive around 85% of the capital of the invoices in the first instance, then when the final payments have been paid by your clients you will receive the rest of the invoice amount minus a small cost for using a Factoring Lender.

Finance in 2012

Welcome to the New Year and we at Select Factoring hope it is prosperous for all!

What do you have planned for the coming year? What to the financial whizz kids predict for 2012? Well, the fact is despite predictions and trends sometimes it all goes to pot and this is when you need a quick, easy solution to provide a range of funding.

Factoring has grown in 2011 and many small and medium businesses have reaped the benefits of this alternative financing solution. Despite this fantastic news, Factoring and Invoice financing still seems to be on the back burner or many people don’t know about it or might be a little apprehensive about using it. Saying that, would you rather wait weeks to be turned down by a bank or wait 24 hours and have the money in your account! It’s really is that simple and we are here to support our British SMEs who really are the fuel of the economy. 2012 saw some real success stories of new businesses starting up and other companies expanding to the international market, so it can’t all be that bad!

So as we raise a glass and cross our fingers to a better 2012, we are here to support a range of companies, providing funding solutions for those who want to expand, factoring isn’t something to shy away from, it’s a growing trend that has taken the USA and Australia by storm and will continue to grow.

It’s a solution for those who have tried the banks, it’s a solution for those who have run out of options and ideas and its a solution to try first before anything else!

The Select Factoring team wish you a happy new year and here is to a profitable 2012!

We would just like to say…

A huge happy New Year from the Select Factoring Team.

May your year be prosperous and joyful


Asset based boom

Asset based financing grew more than any other type of alternative funding in the last financial quarter.

Total funding lent by members of the Asset Based Funding Association hit £16 Billion during the last 3 months, which is an increase of 9% year on year. The number of companies using asset based funding was unchanged but the client size had increased. This is fantastic news as it seems more companies are turning to alternative funding

On the other side of the coin, out of a number of companies surveyed, it was found that they would like to lend more money but are unsure where to start, where first port of call may have been the bank for a business loan.

It’s difficult to get this type of lending out to SME’s. Some are very old fashioned and wary of alternative funding as it poses a different risk to the ones they are used to. Although if you were used to seeing your business advisor at the bank and simply signing a contract for a loan, it is unfortunately no longer that simple. Companies need to be aware of these other methods of funding.

Small to Medium enterprises are seen as the fuel and fire of the economy, if they are suffering with lack of financing how are we meant to get the economy moving again? It’s all about education and information.

For those who have tried factoring, invoice financing and asset based funding, they continue to do so as they realise the potential of having capital upfront. This enables them to grow and puts them in a better position in terms of credit ratings and so on.

Word of mouth is a great tool, but spreading the word is a lot more difficult. So if you know of a company that needs instant capital, mention factoring and asset based funding to them as a quick simple solution.

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