Last week the Serious Professional was given an important task.
He was told to approach a company who operate in the distressed finance sector.
I learned a new term yesterday and it is “invoice financing” until my sources said it I had never heard of it before.
Apparently, it means that a company can take an invoice, and say money that is due to them in a few months from now and effectively sell it to a lender.
The Serious Professional reached out to such a finance house.
What Sevco was offering was the future add-on payments for Joey Garner, Barrie McKay and Martyn Waghorn.
That is, if the conditions are met on, say, a set amount of games then Sevco will receive an additional payment for these players depending on the particulars of the deal.
The Serious Professional presented the proposal that these three players, in toto, could bring in a total of £800k in additional payments.
One of the conditions in the proposal required Martyn Waghorn to play 63 games for Ipswich Town.
That seemed a strange number of games, but my guy had eyes onto the documentation.
For the avoidance of doubt, I have TWO very well placed independent sources to stand this story up.
I know the identity of the finance house and the names of the people currently dealing with this request.
So there you have it.
Sevco is approaching the last chance saloon lending market in December.
In fact, my second source confided that the Holding Company Vehicle is reaching out to several of these distressed lenders.
Well, colour me shocked!
I thought Mr David Cunningham King was going to take care of all this.
After all, it is in the accounts that he will meet any operating shortfall.
Discover more from Phil Mac Giolla Bháin
Subscribe to get the latest posts sent to your email.
You don’t need to be financially distressed to use Invoice Factoring but the Benefits of Invoice Factoring almost always outweigh the negative for under-capitalised businesses. For businesses who have growth being restricted by their cash reserves the cost involved in invoice funding should be substantially less than the extra sales made possible by access to the potential cash sitting in the accounts receivable ledger. I run an Invoice Factoring NZ Company, https://invoicefactoringsolutions.co.nz
As regards the 63 games. If Ipswich do the same as rangers (il) did regards Micheal Ball then the game could really be up at sevco. These finance houses usually work on guaranteed income streams not where there are variables
Phil,
When does the courts and the takeover panel reach a verdict as to what to do with Sevco? What are the possible/probable scenarios?
Before NASA was created (Satan without the t), [canada is in North America as is Alaska, Mexico? Why not call it United States Space Department? USSD]. It’s a government department not an administration.
Anyway before NASA and Radar invention, USA, German, UK, French, etc… battleships used line of sight on the sea to spot enemy ships out to 30 miles away.
On a 25,000 mile earth circumference globe that’s a 522foot rise to the horizon and 522foot drop to the enemy ship. How can you line of sight do that pre 1939 if the sea isn’t level?
http://mathscinotes.com/2013/08/battleship-rangefinders-and-geometry/
Nowadays they have radar (which is a straight line ping a target beyond sight technology anyway) and much more advanced line of sight optics.
It’s flat as fuck.
Well if you had bothered to actually read the rest of the article YOU posted, then you would have found the issue of refraction. Basically light bends due to the air and the us navy used a factor of 7 to allow for this. Please look it up and stop just taking little snapshots of information which fit your apparently flat view of the world….
BTW NASA actually stands for National Aeronautics and Space Administration, not North America…
I realize “facts” are currently being applied loosely and any that don’t fit peoples view of the world derided as “fake news” and some magnificent all inspiring global conspiracy that keeps the truth away from the masses, but really, a Flat Earth???? Give me strength.
Well Sevco go around claiming to be Rangers and are hoping that they convince enough peeps
that it is a fact. Takes all kinds so it does, Stranger than Fiction imho.
Oh Dear! They had to calculate for Gravity, the Earth’s Curve and Spin along with other variables such as the wind etc as per this Naval Gunners Training Manual from the days long before this Flat Earth PSYOP drivel came out recently:
https://maritime.org/doc/firecontrol/partc.htm
Flat Earthers are not very bright as they cannot comprehend such things and also navigation and that is why sailors especially naval ones who have to deal with all of this stuff laugh at them. Also go and watch the videos on the Jesse Kozlowski channel on Youtube who exposes the Flat Earth drivel all the time – he is a SURVEYOR and you cannot tell what is flat or not without using a THEODOLITE etc and he shows the curve etc using this equipment and also shows how you can find all of the SATELLITES that they also use in surveying that the stupid Flat Earthers claim do not exist. Flat Earthers are proof that humans are regressing back to monkeys.
-flat-
Before NASA there was NACA, famous for many iconic and decisive WWII aircraft and pioneering supersonic flight (X projects) and the NACA duct, still seen on many performance cars and light aircraft.
btw in NACA, NA is National Advisory and in NASA, NA is National Aeronautics
But regardless, I agree Rangers are NACA’d
😉 and don’t they know it BIG TIME.
Utter tosh you poor deluded soul.
Hi Jim, can you explain how Earth’s gaseous, vaporish, atmosphere can resist the immense, seemingly infinite, vacuum of space?
Cos you know how scientism claims that ‘nothing exists in a vacuum’?
Well, isn’t Earth itself ‘existing in a vacuum’?
And before you start with the official explanations for such blatant nonsense, I suggest you have a look at them, so you can see that, well, they don’t hold water.
I asked the same question of GTG, above, but it hasn’t been passed.
While you’re about it, Jim, could you also explain how rockets & combustion are claimed to work fine in the vacuum of space but don’t actually work on Earth in a vacuum chamber?
Cheers!
Funny. Thanks for spit my tea out moment 🙂
Mathematics is not your strong point, -Flat-.
Totally agree … flat as fuck with no spin as opposed to fat as fuck and all spin from the Galactic PR man! I would write more but I need to go close the window as we are supposedly travelling at 66.6 mph through infinite space and that’s one hell of a wind being created! 🙂
Surely what u describe is third party Player ownership, by any other language.
Either clubs own players in their entirety and benefit from their sale or FFP is bogus.
Sevco have sold players for staged payments. Selling those payments to city finance houses breaks two principles:
1. It makes the finance houses commercial and legal claimants on players.
2. It brings Sevco earlier than normal cash advances which gives them a Sporting Advantage.
Any finance house will have to settle for Sevco getting the money first and then passing it on to the lender.
The players’ current clubs have contracts with TRFC and won’t change that to a new lot just because Sevco are doing private deals.)
Who in the city is foolish enough to trust Sevco with receiving cash and passing it on?
Is this a desperate attempt to start a relationship with a lender before the cold shoulder sets in? An attempted thin end of the wedge before bigger begging starts? (We’ll go bust and you won’t get your original investment back unless you pile in more…..type of conversation).
Any significance, to your knowledge Phil, in the appointment of a new Director at Sevco ?
Will that be a Naw then…?….:0)
This isn’t even ‘invoices’ they are factoring… its a performance based contract over which they have no control whatsoever.
I cannot imagine them getting favourable terms with any invoice finance outfit. The risk of poor return is concomitant with this type of proposal.
Agreed
This is like any working person taking a bunch of Key Performance Indicators or targets that their annual bonus is based on , and using them as a bargaining chip with their bank manager to get a loan to keep the lights on for Christmas ! However the afore mentioned working person will usually have credibility with the Bank unlike Sevco.
As a side note
I wonder if a certain Bear would be happy to give the peepul of South Lanarkshire new shiny Bentley cars based on this new state of the art “invoice financing” scheme?
Finally Rodgers agrees today in his media briefing that his defence could be better and needs improving.
It’s only taken him a CL group stage with domestic howlers to catch up with everyone else’s thinking.
The Hacks told him in the summer, with injured defenders, he needed to buy defenders before the window shut. He had 3 weeks and bought no-one going into CL football. He assured us everything was fine with Biton as a defender. Well done Brendan you’ve finally caught up with the rest of us.
He’s dropped six points from nine. That’s the same as winning one game from 3.
We need a brand new competent back four. A professional defense coach and new tactics. Mandatory for 8 CL qualifiers in 5 months.
Have things declined since Kolo Toure turned up as a coach? This is a serious business with high expectation.
He’s dropped 4 points from 9. 2 V Hibs & 2 v Motherwell away
Irony of irony…RIFC selling on their ‘invoices’ after last lot left so many creditors stiffed
There’s always Ticketus..!
Apparently Waghorn signed for 2 years.
63 games represents 70% of league appearances (46 games a season) over 2 years, a not unreasonable number based on injuries, loss of form etc
However if all he signed was a 2 year contract and it hasn’t been extended, then in Jan 2019 he could be sold to avoid the bosman free contract player scenario and also, maybe, avoid the follow on fee….
This does sound rather desperate and given the future invoice / payment is dependent on things outside TRFCs control, I can’t imagine any finance house offering them more than 30-50% of the amount.
Factoring and invoice discounting is far more common and established and like any debt or security, the better “class” of security the better the deal. If you’re dealing e.g. with a load of similar small companies then the security is quite low. Dealing with major companies who are financially secure, much better, but they take longer to pay. Dealing with future invoicing from football clubs on things which have not yet “crystalised” looks like very poor security to me.
It’s buying junk on the risk a third party manager will play a player, their board not sell him or let him go, or he doesn’t get injured.
The fact that 63 games from the next two years is far from assured (in fact given his level of appearances over the last four seasons for various clubs it would appear highly unlikely he will make that level of appearances), it’s actually far more likely that Phils story (or at the very least the 63 figure) is pish than it’s true.
I know that’s not how you want to interpret things but there you go.
Why dont they just try and live within their means ?…this constant digging a bigger hole for themselves is madness and they need to start living in the real world .
They are the only club in the world who do not live within their means. They were cheats before they died and the newco are cheats also. Whoever is in the biggotdome will always cheat to catch Celtic
If the sugar daddies at PSG, Man Citeh etc turn off the money tap or, let’s fantasise for a moment, UEFA or FIFA actually enforced FFP, then you may be correct. Living beyond your real means is endemic and penalises honest clubs.
This could have been avoided if they were a profit making organisation with a credit line from a bank.
I can’t see how invoice financing works for them. In my experience it only works once goods have been shipped and payment is assured, but the payment terms create hole in your cashflow. Therefore you effectively sell the debt for a price based on the risk of the finance house not getting paid. Finance houses charge on an ascending scale depending on the risk.
Undoubtably they have a cashflow hole, but the goods (in this case player performance criteria) is contingent on too many factors to be assured and therefore subject to raising an invoice in the first place.
If I didn’t know any better I’d say they’re f*****d. Oh, I do know better and indeed they are! Oh dear, never mind.
My thoughts exactly, I happened to pay a factoring Company this morning, they have taken over payments of a training Company that my organisation uses.
They are called Bibby Financial Services. worth a look up, a fairly big outfit.
Personally I don’t think I’d want to consider this option for my business, the costs associated with this kind of thing outweigh bothering doing it in my opinion. It must be a relief for the training company i use to get guaranteed wedge, however id sooner just chase the money myself or set up pro forma invoicing.
Phil,
I think Leeds United did a similar thing. They took out loans on future TV money, CL money and EPL money to fund transfers such as Rio Ferdinand. They failed to accomplish their goal of qualifying for the CL again and that started the dominoes to topple – players sold for pennies on the pound which resulted in relegation, financial penalties, club sold and so on. Leeds has yet to recover.
Risky game.
Perhaps King is holding off from over investing until Lord B’s judgement is published in order to avoid providing cast iron proof of perjury. Perhaps Lord B is holding off publishing his judgement to see if King will keep his AGM promises of over investing. After all, being duped may be an easy out for a knight of the realm, but would hold little water for a CoS judge. Such a stand off could be the death of Sevco.
Ok here’s the deal.
If you are going into Administration, in say, a month, then instead of letting the Administrator take ownership of those company due payments, you flog em off and use the money. Pay Directors wages, etc… a bit longer. Pocket it.
Then you have Admin. The Administrators have less sources of money.
Just as Whyte sold the Croat for £5m at the January window, prior to Admin, I expect Sevco to flog the highest value players in January prior to an Admin.
Keep an eye on eBay for Ibrox trophy room nick nacks showing up.
I spotted a loving cup last week!
There’s f*ck all in Sevco’s trophy room.
We need to strengthen the team in the January transfer window. We lost a 2-0 lead too easily today
Fully agree. I find that our team is more complacent this year, with pretty much the exact same gruelling schedule.
Sort the defence out and the rest of the team will feel more comfortable and less nervous.
Many of the players have played an extra 30 odd games on top of last years gruelling schedule without hardly any break
I do hope Ashley isn’t selling Newcastle with a view to reinvesting in Sevco
Oh dear
It’ll be very cheap
Phil; factoring of receivables invoices does happen in business. Usually the company doing it are in serious financial jeopardy and can’t wait until the money comes in in normal course.
I’ve worked for 2 companies that got involved in this-One from each side of the biz. When I worked for the company buying these receivables, we charged fees and rates that would make the likes of Wonga jealous. But we only purchased bona fide ones that were completed and past-due, nothing speculative like mentioned above.
As for when I worked for the company selling the receivables, or should say trying to, I got out quickly. It was basically a last throw of dice to keep ahead of the creditors and I knew it. The place went bust within 3 months. But, I guess desperate times call for desperate measures.
This is normally used for one of two reasons. Either the company does not have the wherewhitall to process the invoices (not unusual in MBO or small companies), or they are extremely low in cash. The lender will set the rate based upon certainty of completion. For instance, if they believe that 63 games will be completed, they can get 20%+ inside a year. Try getting that return on investment in current markets. Interestingly, the standing of the other team e.g. Nottingham Forest is most important here as they will be the target for delivery of the agreement. If their standing is good, then the money will be lent.
However, Campbell Dallas may be interested in the cash flow projections which may significantly change as a result of this transaction.
Necessity is the motherhood of all inventions. This does not look promising for an established company and brand to be trying to secure short term finance.
The writing is on the wall if this goes through. Without a benefactor the slippery slope just had some banana skins thrown on
Surely not a company belonging to mr ashley ?
No.
Invoice finance is very popular as allows many companies to grow their business and not over trade.For example if sales and thus debtors rise dramatically an existing bank overdraft facility may not be enough to finance the growth especially when increased purchases are required and increased creditors may have to be paid before the debtors pay the company.Invoice finance is a timing benefit that provides funding of a percentage of the sales invoices when raised as opposed to the company having to wait for the funds when the debtor eventually pays.
Invoice finance is different from factoring in that the administration of the sales ledger and credit control remains with the company.Also often confidential.Many large successful business may use it.
With factoring the sales ledger and credit control function is operated by the finance company who make direct contact with the debtors etc.
In Ireland companies prefer to use invoice discounting due to it being confidential.Invoice finance is cheaper also as less work for the finance companies to deal with.
Sounds exactly the same as selling the seats to ticketus..
Such companies are also known as ‘lenders of last resort’, a term that has a certain resonance…
I know nothing of these things, so just to clarify….
Is this a business goes to a finance company and say “I’ve got a bill I can’t pay but if you pay it now I’ll pay you back with money I’ve got coming in on this date”?
Is this the business equivalent of a pay day loan?
No, you go to a finance company and show them invoices for money that you are owed and they pay you a percentage of that money which will be repaid with interest when you are paid the amount on the invoice. In some cases the lending company will pursue the invoice and receive payment.
I’ll believe they are going bust when i see the St Etienne Bike in Duke st Cash Generators.
This method of financing is quite common and can be an effective method of handling cash flow issues.
I would be gobsmacked if one of the providers took Newco on board, unless they were charging a ridiculous handling fee.
From memory I think Leeds United got involved in a not dissimilar method of financing and it didn’t end well.
This course of action flies in the face of King’s pledge, via NOAL, to step up to the plate and meet cash calls as and when required.
They are on the edge of the abyss yet the fan base thinks everything is hunky dory thanks to the crap being fed to them by the Scottish media. I have vision of that poor Robertson chap standing on the steps of Ibrox reading from a script handed doen by the Craigster.
If the auditors have been led up the garden path they may do walking away very quickly and before the cold shoulder arrives.
Joe…I know from (bitter) experience, that like the two previous firms of auditors to Oldco and Newco,
Campbell Dallas (or whatever name they are using these days), will have their proverbial backsides well and truly covered…
Essex, the auditors standard get out is that they have completed the audit in good faith, that good faith is reliant on the directors honesty, integrity and transparency.
Campbell Dallas will have been aware of King’s counsels claim in the Court Of Session that his client was skint…..they even volunteered proof if m’lud wished.
Given King’s history the auditors must have, surely, bona fide paperwork confirming the funds held by NOAL offshore.
Lord Bannatyne would love to have a look for sure as would SARS.
However paperwork can be copied and find it’s way into public view and I doubt if King is stupid enough to provide anyone with details of his offshore banking in case it fell into the wrong hands and someone asked where the money came from.
So perhaps the auditors only have a verbal assurance from the de facto Chairman after all and they have taken his word in good faith.
Best of luck with that one.
If they are scraping around already for funds how are they going to get through till May’s ST monies?
With a winter shutdown on the horizon I wonder how much they are guaranteed from the tournament across the Atlantic?
The rate of interest inherent in these factoring arrangements is far in excess of market rates and reflective of the elevated credit risk involved. Hence, new businesses lacking in a credit track record often avail themselves of such expensive financing as they generally represent poor credit risks and have no affordable alternatives. In my experience, mature operations relying on such arrangements are almost always some degree of financial distress.
Invoice finance needs an invoice to be assigned to the lender.
This invoice needs to be for goods or services which have already been FULLY delivered/completed and can be proven to have been, if required, at court.
Invoice Finance bridges the gap between completing the work or contract and then the waiting to get paid. Depending on the trade credit terms agreed between debtor and the supplier this can be 14 to 120 days after completion of the contract.
The work in relation to the invoice being funded has to be fully completed.
There need to be no additional terms associated with the invoice. It can’t be reliant on some future event which might or might not happen.
This proposal presents enormous risks for a financier.
Even setting aside the incomplete contract what about player injuries, players dropped for poor form, or even dropped one game short of the magic appearance number to save a few quid for the buyer!
Any of these issues would mean no repayment for the financier. Which is why no ordinary funder would touch this.
This proposal would need a real niche, high risk lender, who would take appropriately large fees for the risk and advance a low %age of the contract value.
Some distressed lender might look at this, but I can’t see this being provided by an invoice financier.
Separate, but important, is the risk of being associated with this entity whilst the TOP issue still present.
Incredible Phil. new they were in distress and relying on loans to survive but this is definitely last resort stuff companies that go down this route are more that a distressed business they are doomed I tell u doomed.
Factoring is fairly common in mainstream business, but I am surprised by this arrangement, which relates to very specific (and performance-related) player transfer contract revenue streams, rather than ‘plain vanilla’, regular, operational income streams (e.g corporate box/other commercial activity). The fact that these obligations are performance-related, and therefore carry a higher degree of uncertainty (the player concerned may never play the requisite 63 games) means that the factoring firm will most likely be charging a higher risk premium. In other words, if the 20% cited by another commenter above seems steep, imagine the eye-watering percentage the factoring firm will be creaming off to even consider a deal like this with the likes of his glib and shamelessness.
It sounds like panic stations at Ibrox. If I’ve interpreted the arrangement you described correctly I’m surprised that an invoice / factoring company would advance cash based on something that may not happen.
An invoice is for goods or services already supplied, so fair enough if Sevco will receive instalments for these players transfer fees but in this case where Ipswich pay out additional cash after a specific number of appearances I very much doubt they will advance anything on that.
Once that cash is spent where do they go next?
Time to sell that ‘auld blue bike’ that represents the European trials of the deid ancestor…
Must be able to get £80 or £90 for it…
Then again, maybe ‘Squinty’ is keeping it on standby for a quick getaway next time he is down iBrokes way! Assuming there even is a ‘next time’.
Businesses may well offer invoice financing or factoring which are actually different. However what is indisputable is that a company promised £7 million and change a few weeks ago from NOAL, would probably not require such a scheme in which to operate it’s financial affairs.
I don’t claim to be a finance or business whiz, however I understand factoring. Invoice financing is new to me! So basically it’s the same thing in a different guise? Sheep in wolves clothing
Invoice Finance is an umbrella term. Under it fall
Factoring: the debtor is told of the financiers involvement. The Factoring company might chase debtors for repayment. Might not.
Invoice Discounting: more hands off for the financier. Debtor might not be told of financiers involvement. For larger entities with their own finance department already.
Also Asset Based Lending: lending on value of stock held.
Most large businesses using IF use confidential invoice discounting. This does mean that no one is generally aware of the many well known, very successful businesses who use this method of funding.
Doesn’t mean a business is in trouble. In my experience, it’s difficult to get an IF facility for a business in trouble.
As others have said this isn’t necessarily distressed business financing. It can be a great way to fund a growing business too. It’s quite common and not unusual by any means.
The principle is that if you are owed money by a first class business who will pay you in 30, 60, 90 days say, then you can borrow against that good debt. The invoice discounters will want to know the debt will be paid with very good certainty.
If it has performance features still to be completed, eg playing more games, then the certainty is significantly less and may mean the invoice discounters decline to take that risk and won’t advance the money. I’d be very surprised if these type of debts fitted the normal approach.
Computer software co. I used to work for was forced by shoddy payers to adopt factoring, bust within 6 months.
firm i used to drive for started using factoring…
were bust within 3 months
just saying
Let’s hope that’s the case here…
Cheers Phil, instead of SMSM reporting on why DM moved on, one or two did a surface scrape to be fair, I’m watching on twitter AM EBT all bets frozen to be the next Manager.
Hilarious.
As the big fat sevconian once said “the big hoose must stay open” and it will…..
phil do you think in the future we could see… Woolworth. blockbuster, Clydesdale, comet, land of leather, jjb sports, hmv, mfi, jessops, habitat, Clinton, peacocks, barratts, all return with the same name, then again , they don’t reside in the big hoose, nothing will ever happen to sevco, ever.!!!!!!!
Are they no all “The People”?
When did Clydesdale go bust?
Brilliant Phil
Phil, the major banks have provided invoice financing for years – I used to use Griffin Factors who were the in-house operation for what was then Midland Bank. These were set up to help new businesses in particular, where cash flow was vital at a time when large companies would delay payment for 60 and sometimes 90 days – a common practice in the 80s and 90s- which could cause distress to a small business.
Our deal was to receive 80% of the invoice sum on day of issue – so you can already see the bank charge was not cheap. This would be repaid along with bank charges on actual settlement, which went direct to the factor company.
A big problem was that after a few years as the business grew, it proved incredibly difficult to buy out of the arrangement – which has to be the ultimate aim for any credible business. Why would you not want 100% of your sales ledger revenue?
Invoice finance is all about cashflow so it’s a great mechanism for a new business that raises lots of invoices on a regular basis on 30-day terms. I don’t think it was intended for football clubs or transfer instalments 4,5, or 6 months ahead. From what you say Phil, they seem to be looking for something similar to the Ticketus deal. I’d be interested in your egg-chasing buddy’s take on this.
It would be ironic off the radar if Ipswich and Forest “MIchael Ball’d” then to avoid any further payments.
It must be legal because our football authorities don’t appear to be concerned with what happened to Ball.
They couldnt do this because the monies due are caveated so tete are no guarantees that it will ever become payable. If any of tgesexplayers gets injured, dropped or simply dont make the required number the the lender wouldnt receive their money.
They couldnt even borrow against potential league position as that fluctuates on a weekle basis.
Think the last chance saloon just told them they had had enough and should be going home…..
I’ve seen this in my industry. The company utilising the facility ultimately entered liquidation 🙂
A sign of distress indeed. In my own example the company in question – alongside legitimate invoices for money due – also raised spurious invoice (£200k) for monies that were not established as being due to them and were in fact a something of a spurious claim. Not clear whether the invoice financing company forwarded a % of monies in relation to that particular invoice.
Anyway motto of the story is finance company be careful. A high risk game for all involved!
They take typically 20% fee, this is a very common way SME finance their cash flow. Though there is usually a fixed due date on the invoice and no variables or they claw back.
Isnt that Factoring? Or are the different terms for the same thing?
Correct.
same thing.
different term.
Fine stuff. What fiscal Chrismas merriment this omnishambles bring to us each week.
What did we laugh at before dying RFC then Sevco…..?
All retail business banks offer invoice financing. It’s not a product for businesses in financial difficulty, just a good way of recieving income earlier if your invoice terms are longer, generally 60 to 90 days.
Even for businesses with no established credit facilities and an extremely dodgy chairman facing the impending wrath of the TPE ?
It hardly sounds like common practice in this instance does it ?
If the company is not in difficulty, why throw away 20% ?
The bottom line here is that no extra money comes into the company….in fact the interest/handling charges reduces the take from sales ledger receipts.
I wonder how Metro bank and the auditors in particular will react to the Court Of Session adding legal weight to the TOP ruling.
Has M’lud had a word with King’s counsel as to the question of funding?
Surely an explanation is due for the differing pictures painted at the Court Of Session and the notes to the accounts as to whether or not NOAL had funds?