Invoice discounting crucial to business success

30/11/2008

A Devon-based building company has proved a good example of the way in which invoice discounting facilities are crucial to business success in the current economic climate.

Andy Halpin, former owner of builders' merchant Payne Timber, gave an interview to The Times newspaper, in which he described his firm's collapse following the withdrawal of its invoice discounting facility.

Mr. Halpin was forced to put his company into administration in October after its lender, Royal Bank of Scotland, reduced its invoice-discounting facility. Mr. Halpin was not able to find a bank to lend the company £150,000, despite its £7m turnover. Fifty people lost their jobs when Payne Timber collapsed.

Mr. Halpin commented: "Invoice discounting in a rising market is great fun but in a falling market it is a nightmare. When business started dropping away we did not have the invoice sales to borrow against. We were doing 50% of our target borrowing, but the invoice-discounting facility was reduced by much more, from £500,000 to £150,000.

"They said we didn't have enough capital to borrow against. A couple of years ago if I had walked into my bank manager's office and asked for £200,000 he would have said what account do you want it in? As soon as they stopped making a profit from us they dropped us."