Invoice Discounting (Domestic & International)

• Understand why Invoice discounting – done well – can be highly profitable and lower risk
• To appreciate the differences between Invoice Discounting and Receivables Finance/Factoring
• Appreciate the risks involved and the mitigates and controls needed to manage these effectively
• Be able to spot opportunities to offer this service to clients
• To realise what a huge impact on working capital a well-deployed invoice discounting facility can make
• Know when to spot things are going wrong and when to take action

Module 1: The Working Capital Cycle

• The working capital cycle
• Overtrading
• A simple cash flow exercise to illustrate the potential problems
• Different types of working capital
• When and how should a bank assist its customers
• When should the bank decline

Exercise: Working capital analysis

Module 2: Invoice discounting basics:

• What is it?
• The growth of invoice finance
• Changes following Re Spectrum Plus Ltd
• Invoice finance distinguished from lending on the security
• The various forms of invoice finance
• Notification and non-notification financing (confidential versus disclosed)
• General Risks
• General Mitigation techniques

Exercise: Case study to suit

Module 3: Setting up the Service:

• Creating a product guidance manual
• Setting operational parameters
• The structure of the invoice finance agreement
• The purpose of the power of attorney granted, if used
• The transfer of rights ancillary to the debt
• Challenges to administration charges as penalty clauses
• The implications of Peekay Intermark

Exercise: Case study to suit

Module 4: Invoice Discounting in Practice

• Minimum/maximum size
• Minimum/Maximum client turnover
• Percentage advanced
• Individual invoices or a portfolio spread
• Secured or unsecured
• Commercial invoices only?
• Collection time frame – what is a normal time-scale
• Issues Arising out of the Assignment of Debts
• The importance of a legal rather than equitable assignment
• Vesting debts – when does the debt arise?
• Non-vesting debts and the prohibition against assignment
• The effect of notice to the debtor, if any

Exercise: Case study to suit

Module 5: Early Engagement of Financial Crime Compliance (and sanctions if overseas transactions involved):

• FCC risks
• Sanctions risks
• Screening
• Inherent risks
• Mitigants
• Residual risks
• CDD, EDD, Discrete DD, KYCBCBC
• Approving individual invoices versus whole sales ledger
• Setting operational parameters
• The structure of the invoice finance agreement

Exercise: Case study to suit

Module 6: initial Client Assessment for Product Suitability:

• Guidelines
• Procedural instructions
• New versus existing customers
• Sales ledger review – if applicable
• Limit setting
• Approvals – blanket and specific
• Risk assessment outcome
• Annual review or individual transactions

Exercise: Case study to suit

Module 7: Risk Assessment for Credit Analysis and Application Purposes:

• Creating procedural guidelines
• Setting parameters
• Analysing the working capital flows
• Break-even analysis
• Double funding risks
• Assessing facility size and structure
• Identifying and mitigating the risks
• Gearing, repayment, profitability and liquidity.
• Specific lending with identifiable maturity dates
• Appreciating and controlling sources of repayment
• Security – Is the last resort in practice despite CCCPARTS

Exercise: Case study to suit

Module 8: Fraud & Conflicts with third parties:

• The distinction between warranties, guarantees, indemnities and hybrids securities
• Conflicts with third parties, including priority disputes with competing assignees
• Fraud and Asset Recovery
• Classic frauds faced by invoice financiers
• Proving damage: GE Commercial Finance v Gee
• The meaning and effect of the trust provisions
• When to rely upon the remedies of dishonest assistance and knowing receipt
• Proprietary remedies and tracing in insolvency
• Freezing injunctions and search orders
• Mitigation techniques

Exercise: Case study to suit

Module 9: Financing & Managing Trade Risks in Challenging Markets

• The value chain – bank perspective versus client perspective
• Structured vs. traditional trade finance
• Risk analysis of a trade import deal looking at
  • Credit risks
  • Product risks
  • Transactional risks
  • Price risks
  • Performance risks

Exercise: Case study to suit

Module 10: Charges and Fees

• Structure and application
• Individual fees or flat percentage charge
• Fees and interest
• Recourse options

Module 11: Managing the Product

• Manual process
• Automated process
• Audit process
• Roles and responsibilities
• Fees and interest
• Recourse options

Exercise: Case study to suit

Module 12: What to do When it Goes Wrong

• A rare event – usually
• KPI’s and KRI’s
• Warning signs
• When to intervene
• Who actually enforces the invoice
• Recourse agreements in practice – especially with valuable clients
• Recovery procedures
• Enforcing security

Exercise: Case study to suit

Course Conclusion and Review / Feedback

The trainer had a highly successful, long and varied “fast track” career in Lloyds Bank which led him to a very senior management position in the bank’s private banking and wealth management division at an early age. He was then “head hunted” to join a merchant bank at main board director level to oversee the private banking and wealth management offering to the group’s major and prestigious clients. He now has over 40 years’ experience in the UK banking and financial services sector.

He has been a freelance private banking and wealth management training consultant since retiring and is currently an external Master Training at both HSBC and Bank of China where he has delivered major projects. He is an accomplished global trainer and has delivered extensive programmes in the UK, USA, South America, Europe, Africa, Asia and Middle East.

He is a highly adaptive, hands-on and highly sought-after private banking and wealth management facilitator who always receives excellent feedback from delegates. He is comfortable training at any level of seniority and experience, from “black belts” to novices. In addition to his private banking and wealth management specialism, his expertise includes but is not limited to Risk Management, Trade Finance, Regulatory Compliance, FCC & AML and all aspects of Private & Retail Banking. He is also a highly experienced soft skills trainer and has completed numerous “train the trainer” assignments.

This practical workshop-style course is designed for relationship managers and those working in sales or supporting the sales team together with colleagues from credit department, responsible for approving finance propositions.

Invoice discounting is a significant form of corporate finance widely used by small and medium-sized businesses, often alongside other asset-based lending such as stock finance, hire purchase, term loans and trade finance. This course is designed to give practitioners an understanding of the peculiarities of this particular form of financing relationship, the problems which commonly arise during the recovery process and practical guidance on how to deal with risk identification and mitigation.

The training can be structured to focus particularly on risk assessment, delivery, need identification, and selling opportunities. The course encourages delegates to see issues from both the client’s and the bank’s relationship manager’s viewpoint.

The aim is to provide high-quality invoice discounting to the bank's clients in a seamless and helpful manner and to assist delegates understanding of the trade flows and the precise nature of the banking risks undertaken. The course will also demonstrate the self-liquidating short term nature of most trade transactions.

Methodology:

The course will be run as a workshop style classroom session, with detailed examples. Delegates are free to bring their own cases/examples to the sessions.

Level of Preparedness:

Beginners are welcome although a very basic working knowledge and understanding of the methods of financing domestic and International Trade would be helpful.