There was time when you did not consider the fact that your funder could go out of busisiness.
The demise of Aston Rothbury Factors Ltd should make people aware that they should make some enquiries about the financial state of their funders. Aston Rothbury follows in the footsteps of Challenge Finance Ltd and Cashflow PartnersLd in being unable to continue in business for one reason or another.
The independant sector offers great opportunities for businesses seeking an alternative to a main streamBank for their funding needs and in many cases offer a truly personal and flexible service. However these companies are often funded by Banks who impose strict covenants on their credit lines. If these covenants are breached it will often impact on the facilities of their clients . The impact could be resrticting the maximum amount of funds advanced to each client and other restrictions that the ultimate lender may impose to improve their position. Clients should be able to detect these changes and they should consider their position.
It is important that clients ensure that in the event of an insolvency of the factor that the ledger they have assigned will be released once their advances have been repaid. Any factor who is a member of ABFA will have such a codition imposed upon them which will give comfort to clients of ABFA members.
Blacks Leisure Group PLc and Sandcity Ltd
Blacks Leisure Plc a publicly quoted has decided to place a subsidiary company into Administration. Following the decision of Clinton Cards Plc to place their subsidiary
Birthdays Ltd this practice of Plc,s placing subsidiaries in Administration could increase
as large businesses see Adminstration as a way of disposing of loss making subsidiaries.
Sadly many suppliers take comfort from the fact that their debtor is part of a large Plc. It will
be interesting to see whether the unsecured creditors receive a dividend. History shows that this is is unlikely and if paid will be small and take some time to be paid.
To be fair this practice is quite legal and may be the only way that a Plc in difficulties may be
able to continue trading. This is small comfort for the many small suppliers who are owed considerable sums. I do not feel that in these difficult times businesses can rely on the fact that their customer is part of a large Plc. It is essential that you monitor the trading performance of both your customer and their parent. If you have doubts reduce the credit
limits and STICK to it. Better to lose some sales than incur a Bad Debt
5th October 2009
Cattles Invoice Finance Ltd
Cattles Plc have announced that they have conditionally agreed terms with AnaCap Partners
for AnaCap Partners to acquire the shares of Cattles Invoice Finance Ltd and Cattles Invoice Finance(Oxford) Ltd. Whilst there is some way to go before the deal is finalised this is good news for the staff and clients of both factoring companies. The parent company Cattles Plc have been going through some difficult times and there were concerns that the problems of the Plc could have had an adverse impact on the subsidiary factoring companies. I would expect that following the sale there could be well be a name change and I suspect that the new owners will start drive the business forward.
12th August 2009
Wrapit Plc
Wrapit Plc was placed in Administration and this will clearly cause some serious problems to the many creditors who are likely to lose money. Many will be shocked as they assumed that Wrapit Plc was a fast growing and successful company. Many trade creditors could have made themselves aware of the true financial position by obtaining information from either Companies House or a credit reference agency.
An examination of records at Companies House reveal some intersting information. In the years 2005 and 2006 the company lost £621,000 and £631,00 respectively despite sales increasing by £2million during that same period. In December 2006 accumulated losses stood at £3million.Liquidity had also worsened over this period from a negative of £517,852 in 2005 to a negative of £1,027,660 in 2006. These figures eveal that this company was clearly a long way from making money.
This information will be of little comfort to the creditors who will have to write off any money they are owed.However lessons can be learned. When granting trade credit you should carry out some basic checks on their customers and should not assume that because a company is growing quickly and have a good PR image that their money is safe.
Remember today's customer can become tomorrow's creditor unless you excercise some sensible credit checks.
For more information contact us
5th August 2008
ScS Upholstery Plc
ScS Upholstery Plc an Aim listed company became a victim of the credit crunch when it was placed into Administration on 3rd July 2008. The company had struggled following the withdrawal of credit insurance cover by a major credit insurance company. This meant that many suppliers did not have any cover on monies owed if they continued to supply ScS. The business was however rescued as the Administrsators sold the business for a nominal sum to Sun European Partners who have agreed to inject a conndiderable sum of money into the new business.
This arrangement of placing a company into Administration and then selling it almost immediately to a third party is known as a 'pre pack' and is used to save a business when a company becomes insolvent and unable to trade.
If your business is facing difficulties this could be a solution. To find out if a 'pre pack' could solve your problems, then contact us as soon as possible,
7th July 2008