Category: Blog
2015-Q3 ETR Briefing
Investabill ETR are fixed value Exchange Traded Receivables, that are Loans or Bills issued under Contract for goods and services supplied to investment quality† companies, or credit insured invoices from Investment Grade [IG] insurers. As at Q3, Credebt Exchange® held RSA of EUR 63.3m+, with EUR 13.2m allocated and EUR 1.39m of Investor redemptions transacted. 9-Quarters trading totalled EUR 54.4m+ trades with all available ETR utilised.
Treasury performance down 12.1% to 87.1% at EUR 10.7m of settled ETR due to RPA ending & new RPA replacements.
Performance 2015-Q3 ETR trade value dropped 10.7% below Q2 due to seasonality & RPA expirations. Total creditors & debtors increased to 1,100+ with a total YTD trade of EUR 30.8m. Daily volumes increased by 17.4% on Q2. Highest single value trade was in September at EUR 0.21m. Total current RSA increased 16.4% to EUR 63.3m+
Trend Yield continued to trend downwards and dipped below predictions of 3.25% at an average yield of 3.24% for Q3. Yield will stabilise at this rate until Y/E. Continued strong Originator supply expected for remainder of 2015. Additional capacity for RPA in excess of EUR 84.7m+ available in Q3 with new institutional demand of EUR 20.0m+ remained ‘subject to contract’ for the period.
† Investment quality is a combination of Investment Grade [IG] organisations & other credit worthy organisations, as determined by AIG and other credit rating providers, from time to time
Year-2 Success Continues
Credebt Exchange completed its second full year’s trading on Friday last, 2015-07-03 and continues to prosper. Continued, careful, prudent management of supply and demand enabled the Exchange to manage an orderly market whilst meeting both Originator and Investor expectations as published. From the outset, the management of Credebt Exchange stuck to its principal aims of of ensuring Investor funds are protected at all times and that Investors’ yield is delivered. Coupled with this core objective, the Exchange also ensured that intelligent finance was delivered to Originators and Investors alike.
Building on its continued success, multiple management roles were added and filled with overall staffing levels increasing by 300%+ in the first half of 2015. In addition, a board was formally appointed in Q2 of 2015 that will sit formally, for the first time in Q3 of 2015. To date, Board appointments are not officially published and once announced, the primary function of the Board will be to oversee risk and compliance. To ensure open communication and transparency, Treasury will report directly to the Board on a monthly basis without any executive management input. This is specifically designed to ensure proper and adequate controls remain at the centre of Exchange policy and practices.
As can be seen from the 2015-Q2 Briefing, demand and supply quarter-on-quarter growth rates in excess of 160%. Intermediaries demonstrated continued support for Credebt Exchange® with increased Investor funding combined with many Investors deciding to re-invest both their principal and yield for a third year. New Intermediary appointments are expected to double those of 2014.
Originators continue to seek out Credebt Exchange Convertibill™ intelligent, handsfree finance specifically because of its ease of use and swift execution service provision. During 2015-Q2 Originators from wide and diverse industry cross-sections continued to join the Exchange with particular interest from retail, medical, services and import oriented businesses. During the Summer months, it is expected that Originators will increase by another 20%+ with a total of 100% growth in new Originators expected before year-end.
Credebt Exchange continues to demonstrated its flexibility and capability and looks forward to strong expansion during its third year of trading.
2015-Q2 ETR Briefing
Investabills are fixed value Exchange Traded Receivables [ETR], that are Loans or Bills issued under Contract for goods and services supplied to investment quality† companies, or credit insured invoices from Investment Grade [IG] insurers. As at Q2, Credebt Exchange held RSA of EUR 54.3m+, with EUR 9.9m allocated and EUR 0.63m Investor redemptions requested. 2-Years trading celebrated with EUR 43.0m+ ETR trades and all available ETR utilised.
Treasury management almost achieved parity with ETR settled at EUR 9.9m, or 99.5% of all outstanding trades.
Performance 2015-Q2 continued strong growth in ETR trade with an increase of 19.9%. Total Creditors & Debtors numbered 930+ with a total YTD trade of EUR 19.4m. Daily volume increased by 59.1% on the previous quarter. Highest single value trade was in June at EUR 0.28m. Total current RSA are valued at EUR 54.3m+
Trend Yield trending downwards from an average of 3.52% and is expected to average 3.25% in Q3. Volumes increased by 59.1% with continued strong Originator supply expected for 2015. Additional capacity for RPA in excess of EUR 52.3m+ is expected in H2 with new institutional demand of EUR 10.0m remaining confirmed during the quarter (subject to contract).
† Investment quality is a combination of Investment Grade [IG] organisations & other credit worthy organisations, as determined by AIG and other credit rating providers, from time to time
2015-Q1 ETR Briefing
Exchange Traded Receivables [ETR], are Loans or Bills, the “Investabills”, issued under Contract and such Investabills are payable by investment quality† companies, or credit insured Investabills from Investment Grade [IG] insurers. As at Q1, Credebt Exchange held RSA of EUR 36.1m, with EUR 6.5m allocated and EUR 0.2m Investor redemptions requested. The full spectrum of available ETR was utilised.
Strong treasury management continues to improve ETR settlement to EUR 5.4m, or 83% of all outstanding trades.
Performance 2015-Q1 started considerably stronger with an overall trade increase of 19.9%. Total Debtors numbered 560+ with a total trade of EUR 6.7m. Daily volume increased by 95.3% on the previous quarter. Highest single value trade was in November at EUR 0.24m. Total current RSA are valued at EUR 36.1m+
Trend Yield remained stable for the quarter at an average of 3.42%. Originator trading volumes increased by 95.3% with continues strong Originator supply expected for 2015. Additional capacity for RPA in excess of EUR 50.0m+ are expected in 2015 with new institutional demand of EUR 20.0m remaining confirmed during the quarter (subject to contract).
† Investment quality is a combination of Investment Grade [IG] organisations & other credit worthy organisations, as determined by AIG and other credit rating providers, from time to time
Credebt Exchange
Since its foundation in 2011, Credebt Exchange® has been purchasing invoices on a revolving basis from Originators that are members of the Exchange. These invoice, or Exchange Traded Receivables [ETR], are payable by the Originators’ customers, or Debtors.
Effective 16 January 2015, Credebt Exchange Limited, with company registration number IE501210, officially changed its name to Credebt Exchange Limited. Credebt Exchange will continue the Credebt Exchange business model and will add a new product that pays Originators’ suppliers, or Creditors, too. The improved business model of paying Creditor invoices and purchasing Debtor invoices, led to the creation of the word: Credebt.
This blended business model is called Convertibill™ and is designed to further enhance cash flow for the Credebt Exchange Originators whilst also reducing their overall cost of funds. This is achieved by enabling Originators to offer their suppliers ‘payment on demand’ for a nominal discount. The discount is then offset against the cost of selling their customer invoices.
Over the coming months, wherever the Credebt Exchange name appears, it will be replaced by Credebt Exchange. Both new and existing Credebt Exchange Originators will be invited to avail of the payment on demand service for their suppliers and to continue sell their customer invoices using the Convertibill™ product offering.
During 2015-Q1, the Credebt Exchange extended product offering for Investors will be marketed under the product name Investabill™. As a sophisticated financial marketplace that facilitates the sale and purchase of Loans or Bills as Exchange Traded Receivables [ETR] or Investabills™. These ETR Investabills™ will continue to trade and generate the working capital Originators require.
2014-Q4 ETR Briefing
Exchange Traded Receivables [ETR], are Loans or Bills, the “Investabills”, issued under Contract and such Investabills are payable by investment quality† companies, or credit insured Investabills from Investment Grade [IG] insurers. As at Q4, Credebt Exchange® held RSA of EUR 23.6m, with EUR 5.6m allocated and EUR 0.2m Investor redemptions requested. The full spectrum of available ETR was utilised.
Strong treasury management continues to improve ETR settlement to EUR 4.9m, or 78% of all outstanding trades.
Performance 2014-Q4 was the fourth quarter and first full year of trading for the Exchange. Total Debtors numbered 480+ with a total trade of EUR 18.8m to Y/E. Daily volume increased by 16% on the previous quarter. Highest single value trade was in November at EUR 0.18m. Total current RSA are valued at EUR 23.6m+
Trend Yield remained stable for the quarter at an average of 3.47%. Originator trading volumes increased by 16% with continues strong Originator supply expected for 2015. Additional capacity for RPA in excess of EUR 50.0m+ are expected in 2015 with new institutional demand of EUR 10.0m remaining confirmed during the quarter (subject to contract).
† Investment quality is a combination of Investment Grade [IG] organisations & other credit worthy organisations, as determined by AIG and other credit rating providers, from time to time
2014-Q3 ETR Briefing
Exchange Traded Receivables [ETR], are invoices issued under Contract for goods and services supplied to investment quality† companies, or credit insured invoices from Investment Grade [IG] insurers. As at Q3, Credebt Exchange® held RSA of €21.8m, with €5.5m allocated and €0.6m Investor redemptions requested in the quarter. The full spectrum of available ETR was utilised.
Further Treasury improvement on ETR settlement at €4.4m, or 79% of all outstanding trades during the period. There continues to be no delinquent ETR recorded to date. Market conditions remain favourable and stable for 2014 to Y/E.
Performance 2014-Q3 was the third quarter of normal trading for Credebt Exchange®. Debtors increased to 390+ with the total trade value of €13.1m YTD. Daily volumes increased by 17% on the previous quarter, 2014-Q2. Highest single value trade was in July at € 0.38m. Total current RSA are valued at € 21.8m+.
Trend Yield remained stable for the quarter at an average of 3.614%. Originator trading volumes increased by 17% with strong Originator supply expected during 2014-Q4. Additional capacity for RSA in excess of €13.5m+ is expected in 2014-Q4 with new institutional Investor demand of €10.0m remains confirmed during the quarter (subject to contract).
† Investment quality is a combination of Investment Grade [IG] organisations & other credit worthy organisations, as determined by AIG and other credit rating providers, from time to time
Irish Times Investor Article
2014-09-23 Irish Times – Investors can capitalise on companies’ need for cash
Options for decent returns on investments are thin on the ground. Buying invoices is becoming more attractive. Getting a risk-free return may never have been more difficult for investors. Read more…
Barclays Bank appointed
Today, after of four months preparation, Barclays Bank will act as the corporate bankers to Credebt Exchange®…
100+ Retail Investors
2014-Q2 ETR Briefing
Exchange Traded Receivables [ETR], are invoices issued under Contract for goods and services supplied to investment quality† companies, or credit insured invoices from Investment Grade [IG] insurers. As at Q2, Credebt Exchange® held RSA of €19.6m, with €4.7m allocated and €0.5m Investor redemptions requested in the quarter. The full spectrum of available ETR was utilised.
Strong treasury continues to improve ETR settlement at €3.0m, or 68% of all outstanding trades during the period. There continues to be no delinquent ETR recorded to date. Market conditions remain favourable and stable for 2014.
Performance
2014-Q2 was the fourth quarter of trading for Credebt Exchange®. Total Debtors numbered 350+ with a total trade value of € 12.2m to date. Daily volume increased marginally on the previous quarter, 2014-Q1. Highest single value trade was in June at € 0.17m. Total current RSA are valued at € 19.6m+
Trend
Yield trend stabilised early in the quarter at an average of 3.607%. Originator trading volumes increased slightly with strong Originator supply expected during 2014-Q3. Additional capacity for RSA in excess of €20.0m+ is expected in 2014-H2 with new institutional Investor demand of €10.0m confirmed during the quarter (subject to contract).
† Investment quality is a combination of Investment Grade [IG] organisations & other credit worthy organisations, as determined by AIG and other credit rating providers, from time to time
Year-1 Success
Credebt Exchange® completed its first full year’s trading today and has much to celebrate. Careful, prudent management of supply and demand enabled the Exchange to manage an orderly market whilst meeting both Originator and Investor expectations as published. From the outset, the management of Credebt Exchange® stuck to its principal aims of of ensuring Investor funds are protected at all times and that Investors’ yield is delivered. Coupled with this core objective, the Exchange also ensured that intelligent finance was delivered to Originators and finally, that the Exchange grew in line with expectations.
As can be seen from the 2014-Q2 Briefing, demand and supply continue to grow in parallel. Intermediaries demonstrated continued support for Credebt Exchange® with increased Investor funding combined with many Investors deciding to re-invest both their principal and yield for a second year.
Originators continue to seek out Credebt Exchange® as an alternative non-bank finance provider specifically because of its ease of use and swift execution service provision. During 2014-Q2 Originators from wide and diverse industry cross-sections joined the Exchange with particular interest from recruitment, services and export oriented businesses. During the Summer months, it is expected that Originators will increase by 15-20% with a total of 60% growth in new Originators expected before year-end.
All in all, Credebt Exchange® has clearly demonstrated its flexibility and capability and looks forward to strong expansion during its second year of trading.
Non-Bank Finance
Since mid-2013, more than €10.0m of working capital has been provided to the numerous Irish micro-medium sized businesses trading on Credebt Exchange®. Instead of using traditional lenders, savvy business owners choose to sell their invoices on Credebt Exchange® because it is more convenient, straightforward and less costly.
Dealing with traditional lenders like banks, factoring or invoice discounting companies is both time consuming and costly. In addition, because the business owner is borrowing, there are endless requirements for documentation coupled with onerous liens and personal guarantees. Regularly, due to the circumstances of the business owner, the personal guarantee is insufficient and funding is refused. When all of these factors are combined with stringent lending criteria, the outlook for business borrowers continues to look bleak.
The decline in funding and overdraft facilities available from traditional lenders has resulted in several innovative newcomers. These new non-bank finance providers are slowly changing the business landscape by meeting explicit, once-off funding requirements. Operating in niche sectors of the market, the importance of these new providers has largely been ignored by the establishment.
Some non-bank providers specialise in either short or long-term lending with others preferring to offer project or venture based lending. Online platforms have also emerged that offer supply chain finance, ad-hoc invoice based lending and receivables discounting too. Notwithstanding the importance of these new non-bank providers, a viable alternative to the bank overdraft or invoice discounting facility is still a primary requirement.
The overdraft or invoice discounting facility is an essential tool for most businesses. Where non-bank lending or ad-hoc trading in invoices may improve cash flow, it lacks certainty. Business owners need absolute certainty on the availability of working capital to ensure continued operational success. Nowhere is this more prevalent than in the micro-medium sized business sector.
Where these innovative non-bank finance providers can solve some liquidity issues, they do not offer, or attempt to replicate, the certainty provided by an overdraft facility. Also, shrewd business owners will quickly identify that the fees and annual interest charges of 12-25% rule out the possibility of regular use. In response to this, an alternative to the traditional overdraft or invoice discounting facility quietly entered the market last year.
The Credebt Exchange® non-bank finance replaces the overdraft seamlessly by providing intelligent finance with certainty. As opposed to a lending model, the Exchange uses a selling model that dispenses with the liens and frustrations of the lending industry. As a wholesale marketplace with both buyers and sellers, Credebt Exchange® is charged with ensuring liquidity and affordable funds availability.
Buyers on the Exchange are Investors with excess capital seeking a yield and business owners, as the Originators of invoices, are the sellers. Credebt Exchange® negotiates and strikes deals on a daily basis by matching Investors’ buy to Originators’ sell orders. To manage an orderly market, Originator sell offers are filled according to specific funding allocation dates that are published on the Credebt Exchange® website. On each allocation date the Exchange agrees to provide the Originator’s total annual working capital requirement and thereby provides the funding certainty they need.
The working capital requirement of the Originator dictates the total value of invoices they must sell in any given year. Unlike traditional lending models, the Originator is not required to sell their ‘whole book’ and nor do they provide any liens or personal guarantees. The Originator simply selects the Debtors whose invoices they wish to sell and Credebt Exchange® buys them on behalf of Investors on the Exchange. As a percentage of turnover, funding costs tend to be 0.5% – 5.0% per annum.
With the Exchange projecting trade of €35.0m by year end, this is a compelling alternative to the overdraft or invoice discounting facility. Any micro-medium sized business owner in need of working capital should certainly consider this new non-bank finance as an option. Providing intelligent finance in today’s market without the need for liens or personal guarantees is a welcome and well-conceived alternative. Credebt Exchange® is quietly maintaining its orderly market whilst also having the potential to disrupt the traditional lending market beyond recognition.
2014-Q1 ETR Briefing
Exchange Traded Receivables [ETR], are invoices issued under Contract for goods and services supplied to investment quality† companies, or credit insured invoices from Investment Grade [IG] insurers. As at Q1, Credebt Exchange® held RPA of €5.2m, with €3.2m allocated and €1.0m Investor redemptions requested in the quarter. The full spectrum of available ETR was utilised.
Strong treasury management improved ETR settlement to €2.4m, or 68% of all outstanding trades during the period. There continues to be no delinquent ETR recorded to date. Market conditions are favourable and stable for 2014.
Performance
2014-Q1 was the third quarter of trading for Credebt Exchange®. Total Debtors numbered 280+ with a total trade value of € 8.1m to date. Daily volume declined for the period at 25+ due to i-ETR suspension. Highest single value trade was in January at € 0.25m. Total current RSA are valued at € 15.5m+
Trend
Yield trending downwards at an average of 3.75% during the quarter. Originator trading volumes remained unchanged, with significant Investor redemption requests in January. Originator demand remains strong for 2014. Additional capacity for RPA in excess of €25.0m+ are expected in Q2-2014, subject to Institutional Investor demand.
† Investment quality is a combination of Investment Grade [IG] organisations & other credit worthy organisations, as determined by AIG and other credit rating providers, from time to time
4. Notice of Intent [NoI]
IMPORTANT:- Some links in this article will only be accessible to authorised Members that have logged into the Exchange Trade Centre
All Debtors that are submitted using the ‘Create new Debtor‘ menu item are subject to approval by the Credebt Exchange® Back Office. IMPORTANT NOTE:-Originators should allow 72-hours for every Debtor approval to occur.
At the same time, the Originator must issue a Notice of Intent [NoI] to each new Debtor created. The NoI is a courtesy letter to the Debtor to advise them that you will be selling invoices, payable by them, to Credebt Exchange®.
The Sample NoI can be copied and modified (i.e. the text can be substantially changed) before being pasted onto the Originator’s own letterhead. However the Originator chooses to modify the Sample NoI, the Notice of Assignment [NoA], that is shown as the last page of the NoI, should not be altered.
The Notice of Assignment [NoA] is a separate document and although it must be included with the NoI, it should not be confused with it. The NoI and NoA are two separate documents. Where the Originator is permitted to modify the NoI as explained in the previous paragraph, the NoA should only be amended to show the Originator’s name and the date that they became a Member of Credebt Exchange®. No other changes should occur on the NoA.
Calculate Working Capital
If a company takes all of its short-term assets (e.g. cash in the bank, receivables invoices, stock, etc) and pays all its short-term liabilities (e.g. suppliers, staff, etc) the remaining balance is their working capital position. If the working capital position is positive, it is more than likely that the company is adequately capitalised and is self sufficient. If however, the working capital position is negative, then the company needs to make up the difference by borrowing money or using some other source of working capital. To calculate the working capital of a business, simply subtract its Current Liabilities from its Current Assets.
Working Capital = Current Assets – Current Liabilities
Knowing the working capital of a business will help to avoid unnecessary financial strain on the company. Companies with insufficient working capital will invariably delay payments to suppliers, fail to pay staff salaries, delay tax payments and may ultimately lead to business failure and/or closure. A useful measurement of the financial health of a business is its working capital ratio. In a financially stable business, the working capital ratio will be above 2.
Working Capital Ratio = Current Assets / Current Liabilities
For example, a company with current assets of 100,000 and current liabilities of 40,000 has working capital of 60,000 and its working capital ratio is 2.5. Working capital ratios below 2 are an indication that there may be a potential financial problem. A company with a working capital ratios below 2 needs to address the issue swiftly by borrowing money or using some other source of working capital.
Finding your Current Assets & Current Liabilities
Go to your accounts system and print your Balance Sheet, or ask your accountant for a recent Balance Sheet. Current Assets is a standard heading on most Balance Sheets. There may be a Current Liabilities heading and if not, there should be a heading: Creditors – amount falling due within one year and this is your Current Liabilities.
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Institutional Roadshow III Begins
Today Credebt Exchange® completed its initial Institutional Investor Roadshow in London. From an initial panel of six UK banks, presentations were made to three. The primary focus of the presentation was on risk and controls. Initial reaction was positive with offers from two of the three banks expected before…
Low Cost Capital
Exchange Overview
Credebt Exchange® provides an unrivalled and unique form of Low Cost Capital specifically for organisations in the micro-medium business sector. The Exchange model is substantially different from any other type of traditional working capital/lending model. A summary of the principal differences is highlighted below:
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Selling model, as opposed to a lending model
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No liens & no personal guarantees
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Low discount rates & no ‘face value’ charge
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Access up to 90% of your invoices’ value quickly
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Single Membership fee, regardless of volume
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Payment terms can be greater than 90 days
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Not required to sell all invoices/entire ‘book’
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No long term contract & leave at any time
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No ‘Debtor Concentration’ (i.e. no maximum value per Debtor)
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Block trading & trade automation are possible
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No retrospective, refactoring, or review fees
- Simple, streamlined online reporting
Grow Your Business
If accessing your working capital quickly and easily is essential to growing your business, then Credebt Exchange® can help you access the capital ‘locked’ in your invoices now. We convert your invoices into Exchange Traded Receivables [ETR] for sale on the Exchange. ETR offer the best Low Cost Capital and most efficient cash flow solution in the market today.
Your Way
Credebt Exchange® Low Cost Capital uses a unique purchasing/true sale, legal assignment model. You are not borrowing money, you are selling your invoices/ETR. Selling your invoices/ETR dispenses with the onerous requirements associated with traditional lending. As a Member of the Exchange, you only sell what’s needed to meet your capital requirements.
Take Control Now
Take control of your cash flow today and apply for Membership by email using the form below. Priority applications can be processed online or by telephone on 01 799-5499
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2013-Q4 ETR Briefing
Exchange Traded Receivables [ETR], are invoices issued under Contract for goods and services supplied to investment quality† companies, or credit insured invoices from Investment Grade [IG] insurers. As at Q4, Credebt Exchange® held RPA of €4.3m, with €2.7m allocated during the quarter. The full spectrum of available ETR was utilised and all currency exposure was hedged.
Settled ETR totalled €1.9m during the period, representing 36% of all outstanding trades. There continues to be no delinquent ETR recorded to date. Overall market conditions are favourable, with strong growth expected for 2014.
Performance
2013-Q4 was the second quarter of trading for Credebt Exchange®. Total Debtors numbered 270+ with a total trade value of € 4.8m to date. Daily volume remained steady in excess of 1,300+. Highest single value trades were in October & December at an average of € 0.15m. Total current RSA are valued at € 15.1m+
Trend
Yield trend stabilised at an average of 3.75% during the quarter. Originator trading volumes continued on a slightly upward trend, with Investor demand slowing in December. Originator demand for 2014 will be strong. Additional capacity for RPA contracts of €10-15.0m are expected in Q1-2014, subject to Institutional Investor demand.
† Investment quality is a combination of Investment Grade [IG] organisations & other credit worthy organisations, as determined by AIG and other credit rating providers, from time to time
How to use risk to your advantage
As explained in the previous article “It’s all about Risk…” you’ll now understand that larger organisations get preferential treatment from banks. That’s the status quo and isn’t likely to change any time soon. So what can you do to improve the banks perception of your business, so that you achieve ‘next best’ status?
The answer is to make sure you present your business as the ‘next best’ lowest possible risk. This means you have to remove all possible negative ‘what if’ scenarios, wherever you can. What if these top two customers cancel their business with you? What if your cost of supplies increases unexpectedly? What if a senior member of staff leaves? What if demand in your market declines suddenly? And so on…
The more you think about all the risks that undermines the integrity and viability of your business, then you’re thinking like a banker. Banks don’t like risk. If you have given sufficient thought to the removal or reaction to risk, then you’re making it easier for them to lend to you.
It’s all about Risk
Once you understand risk, then you’ll begin to understand banks and how banking works. Banks, investors, shareholders, managers, financial markets, brokers and other investment/lending professionals all learn about risk. That’s not to say they necessarily understand risk in all its guises, but they must understand the principal that high risk is bad risk.
Think of it like parenting. Does a responsible parent leave a young child with the wild teenager next door, or do they leave the child with a mature, responsible adult? If you were a bank, who would you rather lend money to: an established, well managed, large company or the young start-up business (notice how inverting this speaks volumes: ‘up-start’)?
As a bank manager, if you are paid the same salary for lending to large companies as you were for lending to the up-starts (sorry, start-up), but were only promoted when the loan was repaid, who would you lend too?
Unless you’re being obstinate, the answer’s simple: the established, well managed, large company is less risky than the young start-up. So they get the money first (and in most cases, at much lower cost too). Only after the large corporates market is satisfied, will banks look to the micro-medium sized, more risky market.
Low risk, high volume lending is more efficient and ‘safer’ than almost every type of other riskier lending to the micro-medium sized business. That’s a simple fact of banking and isn’t likely to change any time soon. So don’t get angry with your bank, if you were in their shoes, you’d probably use the same principal: low risk
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Welcome to Credebt Exchange Blog
Credebt Exchange® enables service and goods providers to offer their invoices as Exchange Traded Receivables [ETR] for sale on the Exchange. These ETR are attractive to Investors and when purchased on the Exchange, this provides Alternative Working Capital to the Originator/seller. A key objective for Credebt Exchange® is to achieve rates that are comparable to, and preferably less than, other commercial finance lending rates. By selling ETR, the trading organisation is avoiding the need for loans and/or credit facilities by using the ETR to provide Alternative Working Capital
50+ Retail Investors
Today the Exchange received funds from it’s fiftieth Retail Investor. Since the first date of trading on 4 July of his Year (see article: First RSA/RPA Trade Executed), achieving 50 Retail Investors demonstrates a strong appetite amongst the investment community for strong, short term cash-equivalents such as ETR….
2013-Q3 ETR Briefing
Exchange Traded Receivables [ETR] are invoices issued under Contract for goods and services supplied to investment quality† companies, or credit insured invoices from Investment Grade [IG] insurers. As at Q3, Credebt Exchange® held RPA of €3.2m, with €1.7m contributed during the quarter. The full spectrum of available ETR was utilised and all currency exposure was hedged
In September, Credebt Exchange® introduced Instalment ETR [i-ETR] with Standard & Poor’s AA- or X2A Long-Term rating. i-ETR are invoices under Contract payable on an instalment basis (e.g. insurance premiums/asset purchases)
Performance
2013-Q3 was the first quarter of trading for Credebt Exchange®. Debtor numbers to the end of September were circa 200. Daily volume rose sharply with total recorded trades in excess of 1,300+. Highest single value trades were in July and September at an average of € 0.4m. Current RSA valued at € 13.1m+
Trend
Yield continued to trend downwards during the quarter, reflective of prevailing deposit rates. Volume of Originator trading continued a steady trend upwards with Investor demand slowing in August and returning to steady growth in September. Outlook for Q4 is medium to strong with immediate, additional capacity for RPA contracts of €3-5.0m
† Investment quality is a combination of Investment Grade [IG] organisations & other credit worthy organisations, as determined by AIG and other credit rating providers, from time to time
Unaffected by Seasonality
The Summer months tend to be the slowest for most Originators (and indeed Investors), however, August continues the steady growth experienced in Q2. The performance demonstrates that the initial Members of …
First RSA/RPA Trade Executed
Membership, Fees & Charges
IMPORTANT:- Some links in this article will only be accessible to authorised Members that have logged into the Exchange Trade Centre
Credebt Exchange® aims to be clear and transparent on the how it deducts charges (i.e. fees and commissions) from payments to any Member account. Before examining any deductions from a Member account, the Originator should log in to their account and view the Important Information items listed on the Exchange Trade Centre | Dash Board (access to the Exchange Trade Centre is restricted to Members only) The information provided here is required reading.
There is also additional information in all of the articles in the Credebt Exchange® Tips & Help public section of this web site. If any aspect of what is documented is not clear, Originators are invited to submit questions to Support using the Support & Customer Care Form. Questions submitted using this form are regularly added to the Frequently Asked Questions, or FAQ, section of this web site.
Combining the Frequently Asked Questions, the articles contained in this section, the Credebt Exchange® Tips & Help and the Exchange Trade Centre | Dash Board with the documentation sent to all Originator Members, should provide a comprehensive understanding of the service. Originators and all Members are encouraged to communicate their views to the Customer Care Team.
The most efficient way to communicate with Credebt Exchange® is by using the Support & Customer Care Form. All submissions are responded to within 24-72 hours.
Exchange Fees & Charges
IMPORTANT:- Some links in this article will only be accessible to authorised Members that have logged into the Exchange Trade Centre
In accordance with the Credebt Exchange® Master Agreement sub section 6.13: “The Account Bank will draw any fees and/or commissions that the Member owes to Credebt Exchange® from the relevant Member Account. Credebt Exchange will provide the Member with an electronic invoice of such fees to the Member.” Sub section 6.13 also states: “In the event that a Member does not pay all amounts owed to Credebt Exchange, Credebt Exchange shall have the right to set-off any amounts then owed by the Member to Credebt Exchange against any amounts then or thereafter due to the Member and/or Credebt Exchange shall have the right to deduct any outstanding amounts due to Credebt Exchange from any Collections in respect of a Traded ETR, or from the Member Account, in respect of that Member.”
Fees are liable for VAT and electronic invoices are issued for each charge that may include a:
- Arrangement Fee – one-time setup charge for arranging Membership as indicted on the RSA Offer
- Debtors Ratings Fee – €11.75 charge for checking each Debtor’s credit rating when requesting an RSA Offer
- Digital Certificate Fee – annual digital certificate charge as indicted on the RSA Offer
- Membership Fee – monthly charge for Exchange Membership as indicted on the RSA Offer
- Posting Fee – discretionary charge per posted ETR as indicted on the RSA Offer
- Collection Charges – discretionary charge for providing credit management and/or debt collection services
Fees are charged on the first ETR sales transaction conducted by the Originator each month. In the absence of any sale of ETR in any month, in accordance with the Credebt Exchange® Master Agreement, fees may be deducted from ETR Settlement or Reserve payments. To view specific RSA Offer(s) and invoices for all fees charged on a Member account, login to the Exchange Trade Centre | Dash Board and use the My Reports link on the left side of the Exchange Trade Centre | Dash Board.
All ETR trading is subject to the Discount and Commissions specified in the RSA Offer. The total Discount is easily calculated as explained in the Calculate the Cost of Funds article. Neither the Discount nor the Commissions are liable for VAT and no invoice is required because these are an integral part of the Purchase Price and the Reserve calculations. These are automatically deducted from transaction payments and may include a:
- Processing Commission – deducted from the Purchase Price, Reserve and other payments due
- Trade Commission – deducted from every payment transferred to the Originator
- Over Allocation Commission – discretionary surcharge for substantial underutilisation of allocated funds
Add New User
IMPORTANT:- Some links in this article will only be accessible to authorised Members that have logged into the Exchange Trade Centre
In many instances there is more than one user in an Originator organisation that requires access to the Exchange Trade Centre. To add a new Debtor, use the Add new User interface that is accessed directly from the Originator Dashboard using the yellow ‘Add new User’ menu item from the left side menu: My Organisation -> Add new User.
When this form is submitted, the new user receives an email inviting them to complete a simple form and submit it. Once the request is approved, the user will receive a second email to complete the process. Once completed, they too will have access to the Exchange Trade Centre.
IMPORTANT:- The new use must complete both forms using the same web same browser, otherwise their digital certificate will not work and they will not be able to access the Exchange Trade Centre.
Investor Demand
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The SB³ Trading Algorithm
The Sell, Bid Bumps & Buy [SB³] algorithm uses two mathematical calculations to regulate efficient, and smooth, trading in volume. The SB³ algorithm injects simple ingenuity into the practical issues of operating an efficient Exchange. The components of the algorithm are:
- Sell
- Buy
- Bid Bumps
Sell
Originators want a simple, fast, efficient and most importantly: reliable source of alternative working capital. This can only be achieved in one of two ways, either by having:
- sufficient deposits ‘waiting’ to be approved and lent (by a bank, for example)
- committed funds that are delivered automatically, subject to meeting specific criteria
As Credebt Exchange® is not a deposit taker or lender, it can only achieve the second alternative if it has the requisite funds committed for automatic delivery. One requisite component for the success of Credebt Exchange® relies on its ability to control the Sell (i.e. the Originator offer) price. The Sell price Minimum Offer stop setting is controlled from the Back Office.
Buy
Investors, provided with choice, will naturally ‘rush to quality’, meaning that they will always seek Investment Grade [IG] with the highest yields, first. This causes a trade imbalance where medium and low IG yields force ‘heavy discounts’ onto Originators. Together, these result in Originators’ Sell price erosion to unacceptable levels and ultimately, may destroy the Exchange business proposition.
To prevent this, the Exchange must focus and adequately deliver on the Investors’ primary requirements for yield and capital protection. During the negotiation of the Buy rate with the Retail Investors/intermediaries, they commit to automated trading in the Revolving Market. This confirmation occurs during the Investor signup process where the acceptance of automated trading, at the negotiated Buy rate, and is activated using the “I Agree” button. The second requisite component for the success of Credebt Exchange® is achieved by its ability to control the Investor bid and Buy price. The Buy price is then automatically manipulated by the two Bid Bump components of the SB³ algorithm.
Bumps
Investor automated, positive or negative, bidding adjustments, or Bid ‘Bumps’, occur using two variables in the SB³ algorithm, namely the:
- CDP Fixed Variable
- Order Floating Variable
CDP Fixed Variable
Credit Default Protection [CDP] is the Credebt Exchange® trade name for credit insurance. Organisations like AIG provide credit insurance to thousands of companies. Like Credebt Exchange®, their risk exposure is to the Debtor. OngThe AIG OnRisk insurance policy, written specifically Credebt Exchange® Master Agreement, provides CDP to Retail Investors on the Exchange. In the event that any Debtor fails to Settle (i.e. pay in full) their ETR, AIG pays 90% of the Face Value of the ETR.
When an Investor buys an ETR, they pay the Purchase Price (i.e. a discounted amount) of the Face Value. The Purchase Price is calculated as follows:
Purchase Price = Face Value
1+((180/360) x (Buy Price x 12)))
On average, the Purchase Price will be about 90.000% of the ETR Face Value. In such an example, if an ETR fails to Settle, the Investor’s risk exposure would be 0.000%. Therefore, to completely eliminate the Investor’s risk exposure, the Buy Price must be increased by a CDP Fixed Variable percentage to ‘fill the gap’. The CDP Fixed Variable increase is the first Bid Bump.
Order Floating Variable
There is no sure method of predicting what ETR value a Originator will post to the Trade Floor. Equally, there is no practical and efficient method of automatically matching the total value of any single Investor’s funds to the exact same and equal value of a collection of ETR†. To maintain the negotiated Investor return for a fixed period the ‘gap’, created between their purchased ETR and the total value of their fund, must be eliminated. As ETR Settle and new ETR are purchased, this gap will frequently fluctuate throughout the fixed period. Each specific Investor will have a different and changing percentage that is called the Order Floating Variable.
SB³ Algorithm Result
The unpredictability of the Order Floating Variable creates a true random number. Its unpredictability is combined with the CDP Fixed Variable to produce a single SB³ algorithm result. This truly random figure is then used to create a truly random set of multiple, automated Investor Bids that:
- creates volatility and/or liquidity on the Exchange;
- prevents reverse engineering for price derivation;
- drives the ‘best Buy price’ towards Originators;
- ensures no Originator Offer is left without a Bid;
- maintains Investor yield at all times;
- mitigates Investor risk; and
- enables institutional Investors to manually trade the volatility
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The Investor’s yield is achieved by purchasing Exchange Traded Receivables [ETR] at a discount. As explained in the ETR Fact Sheet, ETR are invoices issued under Contract for goods and services supplied to investment quality companies or credit insured invoices from Investment Grade [IG] insurers. ETR provide Investors with:
Protected
- ETR payable by investment quality Debtor companies
- 100% ETR Repurchase (see AIG in the ETR Fact Sheet)
- 4-Tier capital protection (see ETR Overview)
Liquid
- Using RPA, typical investment period is 1-Year revolving
- Full or partial redemption available on request
- No ‘break charges’ or early redemption fees
Tax Effi cient
- Signifi cantly tax effi cient for individuals with annual exemption
- Subject to status, may be o -set against capital losses
- Individual’s return taxed as a capital gain
Yield
- Substantial increase on comparable bank deposit rates
- Capital not committed for long periods, or years
- Higher yield than alternative cash equivalents
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