Rather than repeat the difficulties businesses are facing with banks not lending, I would rather inform you of a new initiative/facility recently negotiated on behalf a company which needed additional working capital.

Also the discovery that clearing bank subsidiaries providing invoice finance facilities are restricting the drawdown of cash when funds should be available.

The new initiative;- a clearing bank was providing stock and invoice finance facilities to this growing company who received a substantial firm order from a large national high street retailer. The bank refused to extend additional facilities for this business even though it agreed the order was from a creditworthy first class Plc company and an opportunity which could be repeated annually.

To resolve the situation TFS negotiated a separate Letter of Credit facility to purchase the goods from China for this specific business. At the same time, a legally binding agreement was reached with the bank, who had a full debenture, that once the invoices were raised the trade finance lender would immediately be paid in full.

This facility could only be undertaken with a specific customer and where the transaction can be easily monitored and the goods readily identified. However, once the facility was in place it could be extended to include other new customers. It does require the full support of the insitu bank who agreed to this arrangement because it knew how important it was to the future of the business, but yet failed to finance the transaction themselves!!

Unfortunately, on a less positive note but equally important, TFS has discovered that banks invoice finance subsidiaries are artificially restricting cash availability to companies. They are imposing a lending ceiling on the facility using a maximum drawdown limit which is much lower than would normally permitted within the agreement. This restricts cashflow in a business particularly when it needs it most.

Invoice finance facilities are available elsewhere and where artificial limits are not imposed by the banks, so allowing maximum funding when it is needed most.