On Thursday 12th May 2016, Stewart Roberts from TBOS was part of an ABN Amro Commercial Finance led panel discussion at the Accountex Exhibition regarding how accountants can use asset based lending to help their clients. The panel included Glenn Blackman from Fund Invoice and Rob Kelly from ABN Amro and was adjudicated by Natalie Jameson from ABN Amro.
The discussion was focused on how Asset Based Lending is increasingly being seen as a progressive, flexible funding tool however, to a large proportion of SMEs, awareness of its existence, and potential benefits, is still painfully low, so the discussion asked the question why.
Below is a list of questions asked and answers given by TBOS from the discussion session:-
ABL seems to still be the best kept secret of finance – why is awareness so low and what can we do about it?
When a company is looking for finance the first port of call they go to is their business bank. Often they will take the banks answers of requiring a loan or overdraft instead of considering other types of finance such as trade finance, stock finance or invoice finance. The awareness of these types of providers means that businesses are likely to sign up to expensive and incorrect products without realising they should be shopping around to get the product that matches their needs.
Of course, once it’s on the radar, the Industry doesn’t really help itself in terms of drowning people with confusing jargon and agreements thicker than telephone directories – do you think this is the main reason some believe it’s so complicated
When reviewing an invoice finance quotation the main headline figures are often the same so once there is an understanding of each term it is easy to compare each facility. The reputable invoice finance providers will ensure that the fees are all put in one place and not spread over multiple pages or agreements. One of the main jargon issues is the use of credit insurance and bad debt protection – many invoice finance companies will present a product with credit insurance which is actually bad-debt protection.
ABL is often accused of being expensive – is this true and how does it compare (if it can be compared) to other forms of finance?
The costs for asset based finance can be expensive compared to a standard overdraft or loan from a bank however it can provide a different type of finance for a company. Whereas a loan or overdraft provides a fixed amount of funds, asset based finance is variable as it increases or decreases with the debt it is funded against. As the costs are relative to the debt this can save you money instead of paying for funds that are not required. Also, if you require an increase in a loan or overdraft then you often have to go through a full credit procedure to get the increase and these types of funding can be secured against 2nd charges against property and assets compared to invoice finance which is based on the clients’ creditworthiness and payment terms.
- GROWTH FINANCE
ABL is increasingly seen as a progressive solution for growth finance – with an emphasis on thrive not simply survive – is this a fair statement based on your experiences
Based on our experience within the recruitment industry almost all of the contract based agencies are using invoice finance to pay their contractors before the client makes payment on their invoices. Without invoice finance these agencies would not be able to grow as they would be using their own funds and profits to pay the contractors. The finance offered has increased to include permanent invoice funding and EFG loans which again allows the agencies to borrow funds against their invoice values to allow them to invest in new staff and infra-structure to grow their agency value.
- EVOLVING LANDSCAPE
Pressure on Accountants to evolve their services is at an all-time high and today they are increasingly called upon to provide a higher level of consultancy and advisory – on a multitude of subjects including funding
TBOS is a prime example of where an accountancy firm has decided to provide specialist services to a specific industry instead of providing the traditional services to all types of businesses. This way TBOS has been able to demonstrate that we are a specialist in our industry and as part of that service we have had to become experts in invoice finance as a service required by our clients. We see that clients like the fact that we only deal with recruitment agencies so they know that we have the required experience and expertise to manage their business affairs and I would recommend this to any accountancy firm to look the same way at their own business.
The panel discussion gave lots of interesting points of and showed that Asset Based Lending is important to company growth and that accountants need to be aware of these products to be able to provide help and advice to their clients.