Date: 13th December 2017 at 3:57pm
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Phil Mac Giolla Bhain broke a cracking story the other day, about Sevco going cap in hand to a finance company for what is called “invoice financing.”

As ever, his story has antennae twitching all over Scotland.

Before we start with the meaty stuff, let me tell you all what “invoice financing” actually is.

It’s a concept Scot’s will be familiar with, only we call it something else.

One version of it has thrived here.

We call it factoring.

Factoring, a form of “debtor finance”, is what happens when a company takes its “amounts receivable” invoices to a third party and sells them for a discount. Put simply, if your company is owed money and you’ve sent out an invoice to that effect it can take time for the other party to pay up – thirty days is pretty standard but sometimes this gets dragged out much longer and if that’s income you’re dependent on you can’t wait.

Factoring companies will buy that invoice from you as long as it’s solid, there and then, but you take a hit. You usually pay them a percentage of the total.

According to Phil, Sevco have been shopping around an invoice worth around £800,000. That money is not, as is usually required in these cases, a concrete amount owed. It is made up of future add-on payments for Joe Garner, Martyn Waghorn and Barrie MacKay.

Talk about dodgy. Future add-ons are not stonewall guarantees; they depend on certain criteria being fulfilled and often it never is. That’s why clubs generally don’t weigh them too heavily in their long-term planning, and tend to ask for the bulk of their transfer terms in the actual fee, the one the media gets to write about and which makes all the headlines.

That means the invoice itself is of a highly suspect nature. Much of the money that makes it up might never see the light of day; Phil says one of the obligations in there is that Waghorn plays 63 times for Ipswich over the course of his current contract, a two year deal.

Phil says it’s an odd number, and he’s right.

Waghorn signed for Ipswich on 7 August. He scored on his debut, which was their second game of the season. He has played 13 league games in total. The club itself has played 21. He’s already missed 7 matches since signing. That’s 30% of their games. It’s going to be tight if he’s going to make that number. Frankly, the idea of it is nonsense.

It shouldn’t surprise you to learn that Sevco’s approaches to these companies are being rebuffed left and right, but it’s telling if this is where they are.

Factoring is something small businesses generally do, those who live virtually hand to mouth existences, where every transaction of money coming in results in another of it swiftly going out. Any company that uses this isn’t one with money in the bank.

If this is what Sevco has been reduced to, they are deeper in trouble than we thought and that fabled money from the King family trust fund isn’t exactly pouring into their bank account. To even do this is a desperate, desperate move and that Phil has found out about it – he says he’s seen the proposal and everything – is calamitous.

The mainstream media might not be pursuing it – when do they ever? – but that doesn’t mean it’s not real. And this is serious stuff. As I said, this is a measure for companies, or small businesses, which can’t always afford to wait for clients to get around to paying what they owe.

I have never heard of a football club resorting to this.

One club dabbled in selling future earnings … it was Leeds, who took out huge loans based on Champions League income which never materialised.

The results weren’t great, as you’ll probably be well aware.

I’ve certainly never heard of any company, anywhere, whipping up an invoice that was dependent on the performance of an outside party. Waghorn or Garner or MacKay could get injured; that alone would scupper any chance of these sums adding up. What’s more likely is that they’ll go through hot and cold spells of form and just get dropped … the notion that this is money in the bank, money that just hasn’t been paid yet, doesn’t stand up.

Usually, before a finance company will touch a deal like this the invoice has to be for services or goods that have already been delivered and accepted as bona fide. There is so much wrong with this proposal that it’s hardly a shock that nobody is touching it. Phil says they are shopping this around, hoping to get a bite. They will not succeed, except at a dramatically lower sum than that £800,000. Even then the “lender” will be taking huge risks.

These companies are often called “lenders of last resort.” That’s a lovely term to apply to Sevco, but in fact it’s not strictly true. There are other lenders further down the food chain but they are not companies or organisations you would want the remotest connection with; they are the Wonga style financers, the ones that charge outrageous interest rates.

Charles Green tried them once. Even they didn’t bite.

How long before Sevco has to go crawling to those predatory firms? And will even that get them the cash they need to see out the rest of this campaign? They can’t be far away from the edge of the abyss if this is what they’ve been reduced to. King and his board must be sweating every day that goes by.

And the Takeover Panel has yet to drop its bombshell into the mix.