Businesses are failing to make use of publicly available data that could protect their business from poor payers, according to new figures from the Institute of Credit Management (ICM).

A survey of Members found that a quarter (24.7%) of those questioned do not use the payment performance data provided in B2B credit reference reports – despite the vital help it could provide in helping them avoid poor risk.

But nearly two thirds (63%) of businesses were guilty too of not sharing payment performance data on their B2B clients with Credit Reference Agencies – the very information that three quarters of them (75.3%) rely on to make informed credit decisions.

While the economy is still reeling from the effects of the recent downturn, Philip King, Chief Executive of the ICM says it is puzzling why businesses are not engaging more with CRAs: “If you don’t know the complete financial picture of the business you are trading with, how can you correctly asses the risks involved?” he says.

Philip says it is especially disappointing how few share payment data: “It’s the very information they complain they never have, and yet they do little to help themselves,” he says. “You would expect both positive and negative information to be passed on so other businesses can benefit from the agencies reports. Instead, it just builds up a confused picture of many businesses finances and can result in more companies not getting paid.”

Andy Craven of the business information and risk management solutions provider D&B UK – a founding member of the business information providers association (BIPA) – says that whilst businesses understand the importance of monitoring their credit risk exposure, their checks often only make use of annually filed data – which can be significantly out of date:

“Monthly payments data will provide far more meaningful intelligence,” he says, “provided that credit managers can distil the key relevant data from the plethora of updates they receive. This will give them an insight, for example, into negative payment trends over a sustained period that might indicate a more serious credit problem.”

The survey also showed a mixed response to the usefulness of payment performance data in assessing credit risk for businesses. Around 35% found the information of limited or no use at all to them, 32% said it was useful and only 16% said the information was invaluable.

If you would like discuss how our Debt Recovery service can assist your business, please visit the Debt Recovery section on our website,  contact us on +44 (0) 151 515 3014 or email us.

Please note: Information in this blog post is content property of Business Credit Management UK (www.creditman.co.uk) and the full original article can be found by clicking here.

The Forum of Private Business is responding to the announcement that the UK’s major banks are more than £2 billion short of hitting their small business lending target by repeating its calls for better competition, more investment in regional branches and the restoration of lending powers to local bank managers.

As part of their commitment to lending £190 billion to businesses in 2011 – including £76 billion to small and medium-sized companies – the ‘big five’ banks have pledged to lend £19 billion in the first three months of the year. However, just £16.8 billion has been lent.

According to a joint statement by Project Merlin banks small business lending demand has declined. While the Forum’s own research suggests many firms are focusing on consolidation not growth, the not-for-profit organisation is arguing that this downturn is a result of mounting alienation due to lenders’ punitive risk criteria and inflated interest rates, rather than indicative of a lack of need for affordable finance.

“I am disappointed but, frankly, not surprised that these SME lending targets have not been met – we are prepared to wait until the end of the year before making a final judgement but it is clear the banks are trotting out the same old excuses when they are simply not delivering on the ground,” said the Forum’s Chief Executive Phil Orford.

“There is a widening knowledge gap when it comes to lenders’ ability to gauge small business risk. We want to see banks invest in regional services, and also hand decision making powers back to local branch managers who are best placed to make key lending decisions based on realistic assessments of individual businesses. We must move away from the over-centralised, tick-box mentality we are seeing now.”

Pointing to the latest official government figures on SME finance Mr Orford added: “Despite what the banks are saying, the requirement for affordable funding is not going away. There is a real, pressing need for better, more cost-effective growth finance. The problem is that small businesses are becoming increasingly alienated by mainstream lenders.

“More and more our members are seeking out alternatives but one of the major barriers is a lack of competition in finance markets dominated by the big banks. The few new and innovative funding platforms that are out there struggle to gain a toe hold.

“To reiterate what we have said before, a lending code that is not binding, targets that banks are not meeting and mentoring and appeals schemes of unproven merit are just not enough to fix this serious problem.”

Finance requirements of SME employers – latest government figures

The latest small business survey carried out by the Department of Business, Innovation and Skills (BIS) shows that 26% of SME employers sought finance in 2010, up from 23% recorded in 2006/07.

Demand was higher among firms in primary industries, with 45% seeking finance, compared to business services (22%). According to the report small businesses in construction, transport, retail and distribution were significantly more likely to have sought finance compared to the previous survey.

The BIS research shows 32% of newer businesses sought to access finance, compared to 22% of those trading for ten years or more. By size, medium-sized businesses (4%) were much more likely to seek finance than small (33%) or micro businesses (25%).

In all, 51% of SMEs seeking finance experienced difficulties obtaining funding from the first source they approached – more than twice the number in the same survey carried out in 07/08. More than a third (35%) were unable to obtain any finance at all.

Sectors in which difficulties in accessing finance were most commonly encountered were construction (60%) and transport, retail and distribution (56%). Firms seeking overdrafts were more likely to encounter difficulties than those who sought bank loans (56% compared to 48%).

If you would like discuss how our Debt Collection service can assist your business, please visit the Debt Recovery section on our website,  contact us on +44 (0) 151 515 3014 or email us.

Please note: Information in this blog post is content property of Business Credit Management UK (www.creditman.co.uk) and the full original article can be found by clicking here.

Tomorrow the Government will launch the Business Growth Fund, aimed at helping growing businesses with a turnover of between £10m to £100m. The BGF will invest between £2m and £10m per business in return for a minimum 10 per cent equity stake and a seat on the board.

The BGF is backed by five of the UK’s main banking groups – Barclays, HSBC, Lloyds, RBS, and Standard Chartered – working in collaboration with the British Bankers’ Association. It is one of the key measures recommended by the Business Finance Taskforce, chaired by the former CEO of Barclays, John Varley.

Peter Ewen, MD of Venture Finance and Chairman of the International Factors Group comments:

“It is encouraging to see that banks are working with the Government to support mid-caps and large SMEs. Bank bashing has reached fever-pitch in recent months but it’s clearly time to move beyond this. Yes, many businesses are in dire financial straits post-recession, but to lay all the blame at the feet of banks is over-simplifying things.

“As well as hurting balance sheets, the last few years have also damaged business confidence, creating a ‘siege mindset’ discouraging many from even seeking out finance. The government needs to change this if it wants to meet its growth targets, so the BFG is a move in the right direction. The next step should be more education about the full menu of finance from those in power.

“The business finance landscape is fundamentally changed, and companies need to have a better understanding of their other options for funding growth and how to cope with life beyond the quick-fix credit of the past. Only by regaining financial confidence through education, will businesses be able to grow confidently and become the ‘recovery engine’ the UK so desperately needs.

“The BGF provides long-term equity-based funding and an active partnership with the lender, which is necessary for sustainable growth. Non-traditional forms of lending such as invoice and asset based finance – where funds are raised against real orders – is another sustainable option. Both provide a healthy balance against the easy debt-based lending of pre-2008.”

If you would like discuss how our Debt Collection service can assist your business, please visit the Debt Collection section on our website,  contact us on +44 (0) 151 515 3014 or email us.

Please note: Information in this blog post is content property of Business Credit Management UK (www.creditman.co.uk) and the full original article can be found by clicking here.

Figures published today by the Council of Mortgage Lenders (CML) show that the number of repossessions in the first three months of this year reached 9,100 – up 15% from 7,900 in the last quarter of 2010 but down 10% from the same period a year ago. Levels of mortgage arrears were also down over the same period.

Bev Budsworth, managing director of multi award-winning debt management company, The Debt Advisor, warned: “Today’s figures do not come as a shock. Although it’s good to see repossessions down on 12 months ago, unfortunately, like inflation, I expect things to get worse before they get better as people feel the financial squeeze in this increasingly volatile economy.”

She explained: “Lenders just aren’t as confident as they were last year that they will be able to lower arrears and repossessions. According to the CML, total repossessions in 2010 were 36,300 – down from the initial forecast of 53,000 and revised forecast of 39,000, and a significant reduction from 2009 figures of 47,700. It is forecast that repossessions in 2011 could reach around 40,000 – a similar figure seen in the height of the credit crunch.

“A 2010 CML report warns that the economic recovery remains weak and cuts in government spending, tax increases, higher inflation and the prospect of rising interest rates are all likely to bear down on borrowers’ finances.

“According to Association of Mortgage Intermediaries (AMI), there is a direct correlation between unemployment and mortgage arrears. It further reports that the number of mortgages in more than 12 month’s arrears has quadrupled since 2007.”

The Homeowners Mortgage Support Scheme which was created to help borrowers deal with financial hardship and a sudden loss of income was closed on 21 April 2011. According to an interim report by the Department for Communities and Local Government, in the year up to March 2010, only 32 borrowers were entered onto the scheme.

The Mortgage Rescue Scheme is still in place and allows families to get an equity loan to reduce their mortgage or sell their home and remain as tenants. Up to March 2010, the scheme had helped 629 people.

Bev has seen a number of clients benefit from these schemes, she continued: “We have come across a number of cases where individuals with arrears have been able to sell their property for 95% of the current market value and then rent the property at less than market rates. This has allowed families to free up income to cover reasonable living costs and make a contribution to their unsecured debt.

“The continued decline of house prices since March 2010 means that there is an ever-increasing stock of houses appearing on a stagnant housing market. Therefore, for individuals in debt and with arrears, selling their property quickly is far from certain.

“As long as people can hold onto their job, dealing with the mortgage arrears is first priority followed by dealing with unsecured debt. That’s exactly where Individual Voluntary Arrangements (IVAs) and debt management plans can help as they automatically prioritise payments to secured lenders, which includes provision for clearing arrears. It is then relatively simple to get unsecured loans on reduced payments until the individual can increase their income.

“The problem really arises when individuals lose their jobs and there is little or no income for the household. This is likely to become a real problem for many more people as we move through 2011.

“Effective budgeting is vital if you are struggling with your mortgage arrears. When you know what your surplus is, you can go back and add a provision for mortgage arrears in order to clear your arrears over a reasonable period of time – usually between two and four years, however, this can be extended to the remainder of the mortgage.

“However, if you are facing repossession and you are in a position to pay your normal mortgage payment but your lender is reluctant to agree a more reasonable repayment period, you should seek legal advice. There is very helpful information on the direct.gov website which includes how to get free legal representation.

“Finally, don’t forget your unsecured debts. There is no sense agreeing to a payment plan that leaves you without enough money to live on or without the minimum payment for any credit cards or loans. If neglected, these creditors will ultimately opt for judgements and charging orders which could compound the problems even further.”

If you would like discuss how our Debt Collectors service can assist your business, please visit the Debt Collectors section on our website,  contact us on +44 (0) 151 515 3014 or email us.

Please note: Information in this blog post is content property of Business Credit Management UK (www.creditman.co.uk) and the full original article can be found by clicking here.

The Bank of England must keep the base rate at 0.5 per cent until at least the third quarter of 2011, says the Federation of Small Businesses (FSB), and urges the Government to make this possible by introducing a true fuel stabiliser and signal that consumer taxes will not rise again.

Recent economic data has shown a weakening in manufacturing output and only a modest improvement in GDP and inflation. This, combined with the additional strain on the consumer as prices rise and wages not growing in-line with inflation, will pile on the pressure for the nation’s 4.8 million small firms.

In a new paper, Inflation v interest rates – the monetary dilemma and the effects on small businesses, the FSB is calling for:

The Monetary Policy Committee to:

• Reassess the base rate no earlier than quarter three and to keep the rate at 0.5 per cent until at least that point
• Plan a gradual path to increased rates, rather than impose quick and large increases only when the economy is strong enough

The Government to:

• Not impose any additional increases in consumer taxes that could lead to higher inflation
• Introduce a ‘true’ fuel duty stabiliser that would properly control pump prices and give greater cash-flow certainty to small businesses

Small firms’ confidence grew in the first quarter from -13.2 at the end of 2010 to +6.7, and the FSB believes that by reassessing the economic picture in the third quarter of 2011, would allow time to cement this growing optimism as well as ensuring that GDP and inflation continue to move in the right direction.

John Walker, National Chairman, Federation of Small Businesses, said:

“The problems facing the economy at the moment are worrying for small firms and we are pleased that interest rates were held at 0.5 per cent last week. We understand that rates need to rise to tackle inflation, but with businesses cash-flow and order books low and the consumer already facing a higher cost of living, it could be to the detriment of the small firms that are needed to strengthen the recovery.

“Growth and inflation have started to move in the right direction – according to data from the Office for National Statistics, it is the affect of the VAT increase which is the biggest driver of inflation at present. We believe that before a rate rise can be fully considered that we need to see entrenched economic growth.

“As fuel is having a major impact on both businesses and the consumer we urge the Government to reassess its fuel stabiliser, announced in the Budget, so that it triggers an actual reduction in the duty paid.”

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