This document provides an overview of invoice financing and construction industry financing. It explains how invoice financing works, the criteria for deals, products like factoring and discounting, what is needed to assess a deal, typical deal terms, popular industries, success stories, and comparisons to other forms of financing. It also discusses financing in the construction industry, including how the industry works, common contract forms, issues with financing the sector, and a product overview for construction industry financing.

1. Invoice F inance - E xp laine d
D avid We b b
Bib b y F inancial S e rvice s

2. Age nd a
• Invoice F inance E xp laine d
• B as ic crite ria
• P rod u ct ove rvie w – h ow it works
• C om p aris on to oth e r form s of finance
• Wh at we ne e d to as s e s a d e al
• D e al te rm s
• Working toge th e r
• C ontractu al F inance – Th e C ons tru ction Ind u s try
• Working inte rnationally

3. Bas ic Invoice F inance C rite ria
• Bu s ine s s to Bu s ine s s
• C om p le te d Works (C ons tru ction an e xce p tion)
• Invoice d in Arre ars
• Te rm s of Trad e offe re d
• S o h ow d oe s it work?

4. Invoice F inance P rod u cts - jargon b u s te rs
• F actoring
• D is clos e d - Th e clie nts cu s tom e rs are aware of th e factor
• C onfid e ntial - Th e clie nts cu s tom e rs are u naware of th e factor
• R e cou rs e - Any los s e s d u e to cu s tom e r failu re to p ay are at
clie nts ris k
• N on re cou rs e - Bad d e b t p rote ction is inclu d e d with in facility
• CHO CS - C lie nt p e rform s own cre d it control fu nction
• Invoice D is cou nting
• Disclosed - The clients customers are aware of the discounter
• Confidential - The clients customers are unaware of the discounter
S e e fu ll ind ivid u al p rod u ct d e s crip tion m ate rial

5. Wh at we ne e d to as s e s a d e al
• E xe cu tive s u m m ary
• Age d d e b tors and cre d itors analys is
• F inancials (m os t re ce nt accou nts , m anage m e nt figs )
• E xam p le Au d it Trail (P u rch as e ord e r th rou gh to invoice )

6. Te rm s of th e d e al
• S e cu rity – D e b e ntu re , F actoring Agre e m e nt, P .G ’s
• Ad vance Le ve l – P e rce ntage ad vance agains t invoice s
• C os t and typ e of C h arge s – S e rvice F e e and D is cou nt %
• C ontract le ngth - P e riod of agre e m e nt

7. P op u lar Ind u s trie s for Invoice F inance
• R e cru itm e nt
• Trans p ort
• P rinting
• M anu factu ring
• D is trib u tion
• Bu s ine s s S e rvice s
• C ons tru ction

8. S u cce s s S torie s
• R e cru itm e nt
• Trans p ort
• P rinting
• M anu factu ring
• D is trib u tion
• Bu s ine s s S e rvice s

9. How does invoice financing measure up?
F u nd ing com p aris ons
Invoice finance As s e t b as e d le nd ingO ve rd raft Loan
(F actoring and
invoice d is cou nting
)
Am ou nt of cre d it U p to 90% of you r F rom 60% - 80% By ne gotiation – By ne gotiation
availab le invoice s availab le of th e as s e t s om e tim e s lim ite d
im m e d iate ly. T h e valu ation to 50% of b ook
b alance (m inu s ou r d ebt
fe e s ) is p ayab le
late r
F le xib ility You r facility m ay F or s tock, th e Lim its can b e F le xib le b u s ine s s
grow in line with am ou nt availab le incre as e d , b u t th is loans allow e arly
you r s ale s m ove s in line with incu rs e xtra cos ts . re p aym e nts
you r b u s ine s s Typ ically re - with ou t p e naltie s
ne gotiate d once a
ye ar
S e cu rity re qu ire d O n you r invoice s Typ ically, s e cu rity Typ ically re qu ire s Typ ically re qu ire s
and in s om e is only re q u ire d on s e cu rity, wh ich s e cu rity, wh ich
cas e s , m od e s t th e as s e t m ay inclu d e a m ay inclu d e a
p e rs onal ch arge on p rop e rty ch arge on p rop e rty
gu arante e s and /
or frau d warrantie s

10. Working Toge th e r
• C om m is s ion p ayab le

11. Any Q u e s tions ?

12. F u nd ing in th e
C ons tru ction S e ctors

13. Th e U K C ons tru ction Ind u s try
• UK larges t indus try s ec tor
• E mploys over £2m people
• £100bn of turnover
• E very £1 s pend in c ons truction = £2.84 inc reas e in UK G DP
• Hard hit by rec es s ion in las t 24 months
• G rowth dependent on G ovt inves tment (but whic h party? !)
• 2010 – looks more pos itive
• Various tiers of c ontrac tor / hundreds of S ME contrac tors

14. Wh at is C ons tru ction ?
C ons is ts of various s ectors (with numerous trade bodies ):
• R e tail, O ffice s , Ind u s trial
• U tilitie s , R oad s , R ailways
• S ocial H ou s ing
• G ove rnm e nt P roj cts e
• S p e cu lative D e ve lop m e nts
Within thes e individual s ectors there are:
• N e w Bu ild & R e fu rb is h m e nt P roj cts
e
• M ainte nance , R e p air & R e fu rb is h m e nt P roj cts
e

15. H ow d oe s th e ind u s try work?
Projects are contracted out in a chain or pyramid, for example :
3. The Olympics Development A uthority (ODA )
5. Main C ontractor (Laing O’Rourke)
7. S ub C ontractor (Often B ibby C lient)
9. S ub-S ub C ontractor (Often Bibby C lient)
The chain can go down many more tiers depending on the project

16. Ind u s try C ontracts – Th re e m ain F orm s
1. Lump S um Main C ontracts
• S ubject to monthly valuation and certification
• Lump S um S ub C ontracts
S ubject to periodic valuation and certification can take s ome weeks
• Term Main C ontracts or S ub C ontracts
C ontracts let for a period of time and can be for many years

17. Is s u e s with fu nd ing th e cons tru ction s e ctor
C ons truction is not a s ector favoured by the mains tream banks or indeed
the invoice finance indus try (except Bibby!)…….but why?
• Not always eas y to unders tand / as s es s ris k on nature of trade
• Long term contracts with onerous claus es
• Debt is not “ s ell and forget”
• C omplexity of the debt – contractors often run more than one ledger
• Interim billing that may only be an approximation
• Management of contracting ledgers internally
• S ubject to UK C IS S cheme
• S tandard indus try deductions – retention, MC D, C IS tax

18. C ons tru ction F inance P rod u ct – D e finition
Funding to contractors by offering a
percentage advance (up to 70%) agains t
invoices and/or uncertified applications
for payment throughout the life of a
contract and/or order

19. P rod u ct O ve rvie w
• Releas e of funding agains t uncertified applications
• C onfidential, i.e. cus tomers not aware of B ibby’s involvement
• Funding complimentary with mos t indus try contracts
• Fas t track product for s maller contractors
• S pecialis t B ad debt protection
• Dedicated management unit

20. H ow d oe s it work?
1. Review of contractor bus ines s by B ibby s pecialis t B DM and/or QS
2. Gain clear unders tanding of trade s ector / billing proces s es
3. A s s es s funding need
4. A s s es s our advance level agains t applications (bas ed on s ector / ris k)
5. A dvance up to 70% agains t uncertified applications (often confidentially)
6. Manage client in dedicated cons truction team
7. S hadow running of client contracts by our team = vis ibility / trans parency
8. E mbrace the s ector in which our clients operate
This all res ults in fully informed “ indus try” advis ed lending into the cons truction
s ectors

21. Wh o can we h e lp ?
• C ontractors from s tart up to £50m+ turnover
• Funding Requirement up to £3m
• Mos t indus try s ec tors where we advanc e agains t billing
• G rowing c ompanies with additional working capital needs
• Often operating on res trictive bank or fac toring / ID fac ilities

22. Wh at d oe s a typ ical C ons tru ction clie nt look like ?
• S ub contractor working for a main contractor / employer
• Operating under s tandard indus try contracts and C IS S cheme
• S ubmits weekly / monthly applications & waits an age to get paid
• Has a working capital need not being s olved by exis ting provider
• Needs a more flexible “ indus try led” funding product

23. Wh at s e ctors h ave we fu nd e d ?
• Plas tering & Drylining
• Painting & Decorating
• E lectrical
• C eilings & Partitions
• S upply & Fit (Bathrooms , kitchens etc)
• S hopfitting
• Double Glazing
• C ommercial Tiling
• S caffolding
• A ir C onditioning & Ventilation
A nd many others ………

24. F acility te rm s
• A dvanc e Levels
• S ecurity
• A greement Length
• C harges

25. C ons tru ction F inance In Action
£16m Turnover Refurbis hment C ontrac tor - £500k C o nfid e ntial C ons tru ctio n F inance F acility
R e finance from e xis ting fu nd e r p rovid ing ad d itional working cap ital facilitie s agains t u nce rtifie d
ap p lications for p aym e nt to facilitate b u s ine s s growth and p aym e nt o f s om e h is toric trad e
cre d itor b alance s
£15m Turnover E lec trical C ontrac tor £500k C onfid e n tial C ons tru ction F in ance F acility
-
R e finance from e xis ting fin ance p rovid e r incre as ing workin g cap ital facilitie s agains t invoice s
and ap p lication s for p aym e nt to s u p p ort th e financing of ne wly won co ntracts
£1m Turnover Painting & Dec orating C ontrac tor - £1 00k C onfid e ntial C ons tru ction F inance
F acility
Incre as e d facility ove r e xis ting b ank ove rd raft to p rovid e ad d itional wo rking cap ital
to e nab le contracts to b e te nd e re d for and u ltim ate ly s e cu re d