A new force enters the UK invoice finance market

In the last few months the UK invoice finance market has seen the acquisition of Positive Cashflow Finance and Gener8 Finance by 1pm plc, a diversified business finance company. 1pm has brought these two businesses together under its new Commercial Finance Division.

Ed Rimmer (ER), a former executive at Bibby Financial Services, is the head of this Division, which is effectively a new force in the market. Michael Bickers (MB) interviewed him about the rationale for the acquisitions and his plans for their future.

MB: The Commercial Finance division was founded in May, and you were brought in to head that up. Was there any invoice finance business in the 1pm Group prior to that?

ER: No there wasn’t. They did broker some invoice finance that they got through their asset finance business. They advertised it as part of their offering, but it was purely on a brokered basis.

MB: You now have the acquisition of Positive Cashflow and Gener8, so that is kicking off the commercial finance division effectively.

ER: Yes. 1pm was talking about entering the invoice finance market at the end of last year. Initially the idea was to enter the market as a business within 1pm. However, it was soon evident that the investors in 1pm would prefer to back an acquisition rather an organic strategy. So we started to look at acquisitions.  

MB: On your website, you have Positive Cashflow listed and Gener8 listed. Is the plan to keep those brand names?

ER: Yes, it is very much at the moment.  That may change over the longer term, but in the short to medium term there are no plans to change.  The plan is very much to leverage the brand names that they already have in the industry.

MB: What are your thoughts and plans for the future of the division? Do you have any particular goals in terms of profit targets for the different kinds of products?  Will you be offering additional products to the ones that Positive Cashflow and Gener8 are already offering? And do you have international plans as well as domestic ones?

ER: The two businesses are very similar in the sense that they were originally supported by equity capital and venture capital, and the management of the companies had taken them completely private over the last couple of years.  So the management had owned all the shares. As a result their strategies were based very much on an exit through a sale, and that is what has happened.

What that strategy has led to is two very good businesses, with good books of clients and well-managed, probably not taking a huge amount of risk and not investing large amounts of money for future development because management had one eye on a sale.  I think what the attraction was for 1pm was that we were looking to acquire exactly that: a stable book of clients, based on invoice finance and factoring. 

So one of the strategies for expansion in the future is to grow the product range. That could come through some of the associated products that 1pm is offering, notably asset finance and business loans, so cross selling was part of the strategy that we presented to our investors: we would be offering SMEs more than invoice finance on its own.

Also, with my background in Bibby Financial Services there were other things that I would look to put into the businesses at the right time. Trade finance will be one of those.

MB: What do you mean by trade finance?

ER: Traditional trade finance: letters of credit, import finance, purchase order finance.

MB: Would that also include international factoring?

ER: Yes, there is some international factoring that Gener8 do; they have dollar and euro capabilities, it’s a relatively small part of their business. International factoring is an area I’m interested in that I’ve had success in it prior to coming into 1pm. It is an area that I know particularly well in certain areas of world, where we had operations in Bibby. It is definitely an opportunity that we will look at, at the right time.

MB: So how do you see your USP in the UK market? Where do you see your competitive advantage over the independents?

ER: I think a lot of the independents, certainly at the smaller end of the market, are similar to Positive and Gener8 prior to our acquisition. They are well run businesses offering a high level of personal service, the key decision makers are directors of the business, so things can be done very quickly. So flexibility and agility are all key for them and will continue.

The difference that we see in the future for Positive Cashflow and Gener8 is the 1pm linkage, which means there is more access to funds through the investors that we have and access to other products. That is very different from the smaller independents that don’t have associated companies that can offer asset finance and business loans. 

There is another strand of SME lending which 1pm is now doing, and that is bridging finance and commercial mortgages, which it is offering through a business we acquired earlier this year called Intelligent Loans in Cardiff. So, being able to offer four additional products – asset finance, business loans, bridging finance and commercial mortgages - as well as invoice finance to SMEs is a big plus. If we can effectively provide all that as one offering rather than fragmented offerings, which is where a lot of players have fallen down in the past, then that will be pretty key. Whether it is unique in the marketplace as a USP I would be a bit sceptical, because if somebody is offering something completely unique other people copy it anyway in a short space of time.

So what we have going for us vis-à-vis the smaller independents is what I have just described, and against the banks we have the flexibility, agility and the speed and the real can-do attitude at 1pm that it has definitely demonstrated to me. That was one of attractions that I saw personally in the business: the flexibility and agility and the ‘do it relatively quickly.’ culture.

MB: So, you have the twin advantages of agility and flexibility plus the substantial backing.

ER: Yes

MB: So, are you really looking to provide a one-stop shop for all the needs of SMEs, not only invoice finance but other kinds of funding?

ER: Yes, that’s the aspiration.  It is easy to say but harder to do, particularly when you have segmented businesses and people who haven’t work together before.

MB: So that is where you are aiming to position yourself in the market?

ER: Yes, and I think that’s key really in terms of how the market has changed since I left Bibby’s financial services division and went into its shipping business five years ago. The market has changed quite a lot in terms of the fintechs and all the offerings that people are now looking for. I think from an SME perspective you have to offer a lot more than one product if you want to grow a business. 

You can do that if it is just a lifestyle business, but if you want to grow can you need to do more than that. That is absolutely key if you want to compete against the new players in the market who are offering things that weren’t available five years ago who can offer business loans to people very quickly.

MB: Do you think it is more a solutions approach now that is needed in the market rather than saying we’ll give you factoring and a bit more?

ER: I think the desire of SMEs is the same as it always has been, that is, access to cash. But how it is delivered, that is the difference. Business owners are very open-minded about how they access the cash. Cash can now be delivered very competitively and easily. And that is what they want.  How we do that is up to us, but we need to keep those things in mind. We have to be agile and mindful of that. 

I also think that businesses need the personal service, whilst at the same time they need to have the access and the technology, so that when things don’t go well someone is on hand who understands their business. That is why there is a big place for companies like Gener8 and Positive Cashflow in the market, which are very service orientated and they have that advantage over the platforms.

MB: So, what about the technology, what impact is technology going to make on the Commercial Finance Division? How do you plan to use technology in the business: in the traditional way as used in invoice finance or is there anything that you will be doing differently?

ER: We’re not planning anything revolutionary. But when we did the fundraising exercise to raise the money to acquire these businesses we were very clear about what our plans were for technology. There’s already a project that has started in the wider 1pm Group: they’re looking to see how they can use some of the technology that is available on the market through the fintechs.

A lot of the fintechs have lots of money, lots of people, and have spent lots of time in the last few years developing various systems and platforms.  Where they have struggled is actually originating new business, so I think there is an opportunity to harness some of those skills and people that are in the market and bring that into 1pm to help us make sure that whilst we are very much focused on the personal side of delivery we are also very focused on the technology.  Personal service on its own is not enough, you’ve got to harness technology as well. Some clients will want to have the technology and that’s fine, and some will want that backed up by knowledgeable people. It is really about getting both those things right. That is something we are very aware of in the Group.

MB: Do you have targets in terms of market share or volume growth or profitability and profit levels? Have you been given a five-year target or anything like that?

ER: No, that is really for me to work up at the moment. We have a plan to be a competitor in the mid-market with the likes of Ultimate Finance, Hitachi and Skipton where you have scale and you have more than one office. That’s really where we want to play and compete with a varied range of products plus the service as well.  I don’t see us getting up to the scale of a Bibby or a bank.

MB: Any more invoice finance purchases?


ER: I think for the time being, with the two invoice finance businesses, plus Intelligent Loans, and the acquisition of Bell Finance and its subsidiary Bradgate Business Finance over the last 12 months, there is now a need to consolidate and bed those acquisitions in. However, as with everything, if an opportunity came up and the cash was available and the deal was right, we would look at it. The key thing now is to deliver the goods and put into operation the plan that we put forward to our investors to acquire the businesses. That is our short to medium term plan.