IFG Network UK Limited

IFG Network UK Limited

May 17, 2011 05:45 ET

Finance Directors Wary About Project Merlin's Progress

Loan rate falls as alternative funders step in

BIRMINGHAM, WEST MIDLANDS--(Marketwire - May 17, 2011) -

Editors Note: There is a photo accompanying this press release.

The Interface Financial Group (IFG), North American largest alternative funding source for small businesses, announced that the company offers support to small businesses that are struggling with raising capital to fund growth prior to economic recovery. IFG provides short-term financial resources including debtor factoring, invoice discounting and invoice factoring to companies in the UK, Ireland, United States, Canada, Australia, New Zealand, and Singapore.

As the UK's four largest banks (RBS, HSBC, Lloyds and Barclays) unveiled combined annual profits of almost £25bn for 2010 there was a healthy dose of criticism levelled at them by finance directors of small- to mid-sized businesses for continuing to withhold credit from them. The FD's maintain that the deal between the government and the UK's biggest banks on lending and bonuses, dubbed Project Merlin, will not produce the dose of magic needed to kick-start lending to the businesses that need it most.

As part of the agreement, the four biggest UK banks, and Spanish group Santander, committed to make £190bn of credit available to businesses in 2011, of which £79bn has been earmarked for SMEs. So far, the signs are not promising. Data from the Bank of England for December 2010 showed the net change in loans to businesses fell again, meaning that net credit fell back in all but two months last year.

Meanwhile figures released from ABFA – (The Asset Based Finance Association) show awareness of alternative funding solutions like invoice factoring & invoice discounting is rising – the value of outstanding invoice finance extended to businesses by its members rose by 9% to £12.6 billion in 2010.

Project Merlin makes it plain that the banks' position on lending will be "subject to normal commercial objectives". This means that while money will be made available, the banks do not actually have to lend it and, more importantly, they can charge what they like to do so. Whereas specialist funders from the invoice finance market see this as a significant opportunity to promote their products to the businesses affected by the lack of capital offered from the Banks.

Paul Barnsley, chief operating officer for The Interface Financial Group (IFG) said: "In our view this was the most likely outcome of Project Merlin, and whilst the government can put pressure on the banks to increase lending they cannot influence the lending criteria applied by them. What it has done is to help alternative funders such as ourselves to work with businesses to structure the most effective debtor factoring solution to suit their particular needs"

"Compared to traditional lending using assets tied up in invoices for work completed makes perfect sense and we have seen increased activity in applications and funding requests as a result."

Another issue is the rigidity and availability of funds to certain industries especially construction. Traditional lenders and certain invoice finance funders shy away from this area, but owners of contracting businesses may be able to find specialist funders like IFG can help them with their specific construction factoring product.

We will have to wait to see how the rest of 2011 pans out for the SME owners and to see the full extent of project Merlin's promises, but it is good to see some alternatives are out there to help businesses in their hour of need.

About The Interface Financial Group (www.ifgnetwork.co.uk)

The Interface Financial Group (IFG) provides short-term financial resources including invoice factoring (invoice discounting). IFG launched the UK operation in 2010 following the success of its New Zealand, and Australia businesses which launched in 2004, and 2006. IFG's innovative products also includes spot factoring – the purchase of a single invoice or number of invoices. IFG does not require the whole debtor book.

The IFG Network is the funding arm of The Interface Financial Group providing capital and transactional support to IFG's international office network. IFG has grown to over (150) international offices in the UK, the United States, Canada, Ireland, Australia, New Zealand, and Singapore. Each IFG office is managed on a local level, providing immediate service to clients with local knowledge and experience. This makes IFG unique to all other Factoring Companies in the UK. The IFG team has substantial business experience and expertise in numerous diverse areas, including accounting, finance, law, marketing, banking, etc.

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