As the nation awaits the Pre Budget Report in fear, if it has sense, LA has come across a new and devastating problem.
Invoice discounters have downgraded Automotive.
What does this mean. it means that suppliers to the Automotive industry that had sensibly planned their cash flow are now stuffed.
The downgrade is 30%.
For those not familiar Invoice Discounting has grown massively over the last few years due to the brumark ruling (see post "Simple Steps 4"-9/11/2008). A raises finance by passing its debt onto an invoice discounter. It means on day 1 they will get usually between 70 and 90% of the value, this amount is pre arranged. the 30% reduction means an engineering company that would have raised a £100,000 invoice to an Automotive company would receive for example £80,000 straight away. As of this week that company will only receive £50,000!!!!!!! That could, and in some cases will mean the wage bill cannot be met!!!!!
These Invoice Discounters are not necessarily High St banks, the Chancellor and the treasury need to look at this now. Tens of Thousands of jobs are on the line. Of course, today it is Automotive, tomorrow which sector?
LA would point out that this is now the most serious short term threat to credit in this nation. The treasury are looking in the wrong direction. Action is needed now to avert disaster.
LA
Challenges
11 hours ago
4 comments:
"Invoice discounters have downgraded Automotive"
Where do you get your information from as invoice discounters don't grade industries but individual credit risks and they certainly wouldn't just reduce initial payments overnight from 80% to 50% just because the customers are in the automotive business
LA,s information is from a group of very concerned business advisors that were called into 3 different suppliers to the automotive industry on Friday and Thursday this week.
They will not fully pay out on any invoice that is to any company they class as automotive.
This is indeed unheard of, the advisors were horrified, so was LA.
I am one of the most experienced factoring and invoice discounting brokers around and this is something that I have not come across before. It is possible that one or two specific factoring companies do not like one or two specific automotive companies but there is no blanket write down of the automotive industry.
If your associates' clients are suffering unduly I would be more than happy to help source alternative funding arrangements
Ian,
LA will pass on your details, LA hopes you are correct!
LA
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