If a factoring broker introduces you to Lloyds Bank Commercial Finance find another broker

Early last year I wrote a blog post condemning Lloyds Bank Commercial Finance for their offer to factoring brokers to pay them 40% of their factoring commission income for the life of the facility.

The point that I made at the time was that this commission rate “is significantly higher than the industry norm and is potentially highly lucrative for factoring brokers many of whom will now start to introduce new clients to Lloyds Bank Commercial Finance for the their high rewards alone irrespective of whether that particular factoring company is the best fit for the company or not.”

Judging by their recent press release it appears that my fears were justified as it seems that so many greed driven factoring brokers drove their client base towards Lloyds that they have now set up a dedicated broker team to cope with the influx of business.

factoring brokers feeding at the troughLloyds claim that since they introduced their new commission structure the number of broker deals has more than doubled which bears out my concerns as the product hasn’t changed which leaves the broker’s commission income as the driver. Surely anyone apart from the pigs with their snouts in the trough will see that this is wrong as a broker is supposed to add value and if these people are just introducing business to Lloyds Bank Commercial Finance so that they can grab a bigger slice of the pie for themselves then that is morally wrong.

It isn’t just new factoring clients that are likely to be directed towards the brokers’ money tree that is Lloyds Bank Commercial Finance but existing clients whose current factoring arrangements are up for renewal will also be targeted and persuaded to switch as that will be even more lucrative for the broker than a new client in many cases.

Factoring Solutions receives a variety of commission rates from the different providers that they deal with but none anywhere near what is on offer from Lloyds Bank. Despite that we are happy to continue with our current provider panel happy in the knowledge that we are adding value to the client and not our own bank balance

I’ll end this short blog post by re-iterating the post title and if any prospective customer finds that their broker is trying to introduce them to Lloyds Bank Commercial Finance think hard about whether that is because it is the best fit for your business or else it’s because 40% of whatever Lloyds make will be returned to your broker as commission.

 

Working Capital Partners Ltd – the final chapter

I’m sure that Working Capital Partners and it’s owner Perry Burns will be pleased to know that this post will be my final words on his company.

My original post had an amazing response with over 500 unique views and with much of them coming from the various factoring groups on LinkedIn there can’t now be many decision makers within the factoring industry that haven’t read it or don’t know what he and his company have been up to. Many have contacted me to share their own views on Mr Burns’ actions and not one single one of them have even come close to agreeing with what he did with “Shooting himself in the foot” being perhaps the only one of many quotes that are printable in a family friendly blog.

As I mentioned in my last blog post I posted a pretty poor review of the company on Trustpilot titled “Not to be trusted by the broking community” and giving the company the minimum of one star.

Judging by the flurry of positive reviews that followed, Perry Burns rounded up some of his mates and asked them to try and redress the balance by saying some nice things about his company.

One of the brokers who gave him a positive review was the subject of a previous article on Factoring Blog as he was one of three directors of a factoring brokerage that went bust in such a spectacular fashion that one of his co-directors was made bankrupt and banned from holding a directorship for four years. A good referee indeed 😀

Part of the above’s reference is that “Working Capital Partners are run by a very experienced management team.” The two main board directors don’t have any factoring experience at all prior to setting up their company whilst the Director of Commercial Operations isn’t actually on the board at all and has previous employment on his CV at one of the few factoring companies to go bust.

Working Capital Partners obviously take their Trust Pilot testimonials very seriously as they have a testimonial slider on the front page of their website in which one after the other of the wonderful testimonials are presented to the world for the reader’s consumption.

Oddly enough the one star testimonial left by Factoring Solutions never appears at all so it seems that whilst I don’t understand the technology involved the company have found a way of excluding their negative reviews. Is that misleading or dishonest or both. I leave it up to the reader to decide.

Looking further into the company’s website the section entitled Team / Our Roles states that Perry Burns is a member of the Asset Based Finance Association’s Executive Committee, the body responsible for setting and enforcing standards across the industry.

I won’t comment on Perry’s suitability to be sitting on the body for setting and enforcing factoring industry standards but he would be the last person I would choose and from the many comments made to me by senior factoring personnel I am not alone in that thought

The fact that Working Capital Partners Ltd is even a member of what was the Asset Based Finance Association is surprising as the association states that one of the criteria for membership is that “The company has a net worth in excess of £250,000”

According to their last published accounts Working Capital Partners Ltd has a share capital of just £1,000 which is probably the lowest in the business by an ABFA member by a long way and the company seems to be propped up by loans without which it would be technically insolvent.

Thumbs Down from Factoring BlogI set up the Factoring Blog nearly ten years ago to write about some of the things that I didn’t like about the factoring industry as I was in the fortunate position of not having to be reliant on anyone within the industry so could say what I felt. In all those years this is the first time that I have had to write about something that affected me personally and whilst Perry Burns probably felt quite smug when he took the decision to shaft me and my company out of the (fairly substantial) commission that EVERY other factoring company would have paid I hope that he thinks twice about doing it to anyone else.

Obviously I will never deal with his company again and his loss has been the gain of both Creative Capital and Calverton Finance as I have already passed them a single invoice factoring lead each which will hopefully be the start of a more mutually beneficial relationship with the former and the continuation of an excellent relationship with the latter.

I will finish the miserable saga of Working Capital Partners with the same warning that I started with that if Perry Burns is happy to shaft me in pursuit of a few more pounds on his bottom line what makes you think he won’t do the same to you too as after all one of the better known quotes from the bible is about the inability of either an Ethiopian to change his skin or a leopard his spots.

Caveat Emptor

Working Capital Partners Ltd – the saga continued

I think that it’s fairly obvious that I am rather angry about the underhand way that I have been treated by Working Capital Partners Ltd and seeing that one of their other introducers left them a five star review on Trust Pilot I thought that I would leave my own views on there too.

My review generated the following response from Perry Burns:-

I’m am truly sorry Ian, that you feel like this and that you have chosen to air your grievance in this way. It is absolutely not standard practice as you state. Our broker agreement specifically anticipates and excludes this circumstance. Just as our clients pay no monthly administration, monthly minimums or termination fees, so our introducers’ entitlement to commission ends if or when the agreement terminates. It is interesting that after the client realised what he had lost by moving to another Factor – in terms of flexibility, personal service and bad debt protection; he came back to us directly and not to you. In fact when I spoke to him, he expressed surprise that you had continued to be paid commission (at very substantial levels) even though all you had done was to pass on a name and phone number two and a half years ago. It is important to realise that ultimately it is the client that pays the commission and while we think it is right and fair to compensate an introducer for putting us in touch with a potential client, we do not agree with you that this represents an automatic right for us to load a client’s fees once the introduction has lapsed and the agreement has been terminated.
Perry

Comments on Perry Burns ridiculous response

I have several comments to make on Perry Burns’ response starting with his comment of me “choosing to air my grievance this way” I really don’t know what the company expected me to do as once they had said that they didn’t intend to pay me any further commission, dialogue with them was effectively over. I can’t respond on Trust Pilot so have chosen to use this blog to air my grievances.

Secondly Perry Burns claimed that the client said that “all you had done was to pass on a name and phone number two and a half years ago” which was effectively true although the client had never heard of spot factoring so I had to sell the concept to him. Furthermore Mr Burns seems to be ignoring the fact that I introduced this very lucrative prospect to his Working Capital Partners and not Creative Capital or Catalyst Finance or Interface Financial Group all of whom would have gladly accepted the business and probably wouldn’t have screwed me in the process.

Perry Burns shows how out of touch he is with the factoring market

Mr Burns states that paying commission on a client that leaves and swiftly returns is “absolutely not standard practice” which I believe shows how out of touch he is with the whole factoring market as not only is it very much standard practice but I have posted comments from directors of four separate factoring companies on my original blog post confirming that it is very much standard practice and if Mr Burns is not happy with those four I can easily get some more.

I’m intrigued to know why if Working Capital Partners didn’t intend to pay my commission on the return of the client did Andy Phillips the Director of Sales telephone me to give me the good news that they were returning?

Mr Burns states that their broker agreement “specifically anticipates and excludes this circumstance” but I will have to take his word for as I have never seen his agreement and as previously mentioned have always done business on the basis of mutual trust.

I do find it rather an odd clause to put in a broker agreement though and if true I can’t see the higher profile larger broking outfits signing it or even agreeing to it.

Two or three years ago when  ABFA brought in some recommendations from their Professional Standards department many factoring companies did send out broker agreements and I checked back over some agreements that I received from other factoring companies and as expected none of them mention such an eventuality at all. Needless to say I didn’t receive one from Working Capital Partners at all.

Mr Burns further claims that “It is important to realise that ultimately it is the client that pays the commission and while we think it is right and fair to compensate an introducer for putting us in touch with a potential client, we do not agree with you that this represents an automatic right for us to load a client’s fees once the introduction has lapsed and the agreement has been terminated”

Yet again this is at odds with standard industry practice as introducer commission is a cost that is normally borne by the factoring company. There are a couple of large broking outfits that insist on introductory commissions far larger than the industry norm and if Mr Burns’ comment that their commissions are loaded onto the clients’ fees is true then they would never sign anyone as they would be hugely uncompetitive

Obviously I won’t introduce any further prospects to Working Capital Partners as if they are happy to screw their brokers I dread to think how they would treat their clients.

I was chatting to an old factoring friend who had moved over to a spot factoring company and told him that I was on the lookout for a new provider.

He seemed quite shocked when I told him what had happened and confirmed that if I introduced a client to them that went away and returned within a few weeks they would continue to pay the introductory commission.

I also asked him if they charged a higher rate to companies that came via a broker to those that came direct and he confirmed that they would not and that broker fees were an overhead that they absorbed.

The icing on the cake is that their standard fees factoring fees are actually lower than Working Capital Partners.

As an end piece to this post I received an email from a major factoring company last week telling me that an introduction of mine several years ago that went bust in October has now set up again and the newco will be marked as an introduction from myself.

I’m glad that there is still integrity in the majority of the factoring world.

Four comments from factoring company directors below showing just how far Mr Burns’s comment that to continue paying an introductory commission to a company that leaves and returns very quickly is “absolutely not standard practice” is not borne out by the factoring world in general.

(please see additional information in the form of comments here

Comments from other factoring companies

This is shocking behaviour


We always acknowledge the originating introductory source in these circumstances and have done for you Ian and other brokers in the past

Brokers are the lifeblood of the market and provide an invaluable service and should be rewarded accordingly

Thanks for your recent email and telephone conversation yesterday.

I can confirm that referrals from experienced  professional factoring brokers are vital to our business. We appreciate our commissions are your income.

If you referred a client to us and unfortunately the client left but decided to return within a short period of time we would definitely restart paying the commission due as  without you we would not have met the client in the first place

I am so sorry to hear what has happened with another provider.

We work in partnership with our introducers and treat each and everyone of them as gold dust. Working as a team together gets the right solution for the prospect client and this is the aim in all of your introductions.

If a prospect business leaves and comes back, then the relationship will still be classed as an introduction from you. Its all about reviewing long term relationships!

Not a good representation of the sector really is it.

‘I have always stated that an introduced client remains just that, for the life of the client, including any other directly associated business’.

Agreement to pay a specific introducer should follow that operating practice as without the introducer you would not have gained the benefit of the client in the 1st place. I have worked within the factoring industry at a senior level for 25 years, and this is how we have always operated’

 

Working Capital Partners – brokers and introducers beware

Working Capital Partners is a spot factoring (single invoice factoring) company set up a few years ago which is wholly owned by Mr Perry Burns whom according to his LinkedIn profile had no factoring experience prior to setting up the company.

Factoring Solutions is one of the oldest established specialist factoring brokers around and we have introduced various companies to Working Capital Partners over recent years and received introductory commissions in return. One of the companies that were introduced by us has grown significantly and is one of their largest income earners if not the highest income earner for them. To put this in perspective their income from this client during the year to 30th June 2016 would have been in excess of £76,000 and running at the rate of £110,000 pa six months later judging by the commission paid to FS

According to the latest published accounts the total outstanding debts of Working Capital Partners as at 31st December 2016 were just over £2.5m whereas the current assets of their client just one month later were a smidgeon over £800,000 and with a facility limit of £500,000 this particular client could have represented 20% of the factoring company’s total outstanding debts.

Unfortunately the client was approached by another factoring company earlier this year who made them an offer that they thought that they couldn’t refuse so they terminated their facility with Working Capital Partners to move to the new factor.

Once the company had terminated and left, the new factoring company decided that they didn’t want to fund the company after all leaving them in no mans land so they returned cap in hand to Working Capital Partners who took them back again.

Thumbs Down from Factoring BlogIt would seem that Working Capital Partners in their infinite wisdom have decided that as the company approached them directly to return that no further commission would be payable to Factoring Solutions as it wasn’t an introduction from ourselves.

From our point of view this disgraceful behaviour goes against the conventions within the factoring industry as all reputable factoring companies take the view that they wouldn’t have had the client in the first place if it hadn’t been for the introducer.

In this instance we received a telephone call from Andy Phillips the Director of Sales of Working Capital Partners to tell us of the good news that the client wanted to return and that Perry Burns was discussing a new facility for them. My response was to ask Andy Phillips to let me know if for any reason they didn’t offer a new facility and I would try and find them a new home but if they were happy to go ahead I would leave it in their capable hands.

This would have been in about the third week in August as although I didn’t make a note of the exact date I do recall that I was on holiday and walking along the promenade in Calheta, Madeira when I took the call.

I didn’t hear any more but happened to notice that Working Capital Partners had registered a new charge on 31st August so I sent Andy Phillips an email saying that I was surprised that I hadn’t been informed that the client had signed up again to receive a rather sarcastic reply in which he referred to the company as “your client” (his italics not mine)

It has now been confirmed by a director of Working Capital Partners that they don’t intend to pay me commission on the re-signing despite the fact that the gap between the old facility and new was just a matter of a few weeks.

Needless to say I am not happy about this and when discussing the matter with a couple of directors of factoring companies they both told me that Working Capital Partners behaviour was despicable but it was partly my fault as I’m old fashioned and believe that my word is my bond and I do business on a handshake expecting others to do the same. In my defence in 18 years as a specialist factoring broker this is the first time that I have ever been shafted by a factoring company.

We have had situations in the past where other factoring companies haven’t picked up additional associated companies also signing up but they have always paid me commission retrospectively when I’ve told them. A couple of months ago I spotted that a client of mine that went bust three years ago started up again the same month with the same factoring company and when I pointed this out to them they had no hesitation in paying me the backdated commission for the three years.

If any broker or introducer reading this is thinking of introducing business to Working Capital Partners I would strongly advise you to make sure that you have a watertight written agreement with them before you do so otherwise you may find yourself falling victim to their less than ethical behaviour too as if they have shafted me I’m sure that they won’t think twice about shafting you either. Another point to consider is that brokers and introducers are the lifeblood of independent factoring companies so if Working Capital Partners are happy to “shaft” a broker in their grubby search for more profit what do you think they would do to a client. I leave it to you to decide.

As a postscript it’s fairly obvious that we won’t ever introduce any further business to them so there is a space on our panel for a single invoice factoring company and for the benefit of those factors that have never dealt with us I would confirm that:-

We will never introduce any company to you that we know to be a “wrong ‘un”

We will never churn any client in anticipation of higher or more commission elsewhere

We will never twist your arm to take on a client that you aren’t happy with

We will never introduce prospects to more than one factoring company on the basis that whichever wins – we do

To show just how out of kilter Working Capital Partners’ behaviour is with industry standards I have noted below some comments made by board members of other factoring companies that we deal with.

 

Comments from other factoring companies

This is shocking behaviour


We always acknowledge the originating introductory source in these circumstances and have done for you Ian and other brokers in the past

Brokers are the lifeblood of the market and provide an invaluable service and should be rewarded accordingly

Thanks for your recent email and telephone conversation yesterday.

I can confirm that referrals from experienced  professional factoring brokers are vital to our business. We appreciate our commissions are your income.

If you referred a client to us and unfortunately the client left but decided to return within a short period of time we would definitely restart paying the commission due as  without you we would not have met the client in the first place

I am so sorry to hear what has happened with another provider.

We work in partnership with our introducers and treat each and everyone of them as gold dust. Working as a team together gets the right solution for the prospect client and this is the aim in all of your introductions.

If a prospect business leaves and comes back, then the relationship will still be classed as an introduction from you. Its all about reviewing long term relationships!

Not a good representation of the sector really is it.

‘I have always stated that an introduced client remains just that, for the life of the client, including any other directly associated business’.

Agreement to pay a specific introducer should follow that operating practice as without the introducer you would not have gained the benefit of the client in the 1st place. I have worked within the factoring industry at a senior level for 25 years, and this is how we have always operated’

Interesting move by Aldermore

It has recently been reported that Aldermore has taken a 48% stake in the parent company of a group that includes a commercial finance broking outfit called Asset Finance Solutions (UK) Ltd and another called Synergy Commercial Finance Ltd

This is an unwelcome step to the rest of the broking market who may be unwilling to introduce business to a finance company that owns one of their competitors.

is your broker independent or tiedThe home pages of both Asset Finance Solutions (UK) Ltd and Synergy Commercial Finance’s websites states quite clearly that they are independent commercial finance brokerages not lenders” but ethically how can they state that they are independent when a funder has a significant shareholding in the parent company as well as two directors on the board.

The home page of Asset Finance Solutions states quite proudly on their home page that “Asset Finance Solutions was formed in 2005 and has quickly grown to be one of the UK’s leading independent funding providers” which again is misleading.

Both company websites have either a blog or news section yet neither mentions anything that might cause readers to question exactly how independent they are as any comment concerning their new substantial shareholder is conspicuous by it’s absence. One wonders why the appointment of a new sales director is deemed to be newsworthy but the selling of a significant share stake to a challenger bank is not.

As a specialist factoring broker I have long refused to deal with Aldermore so their stake in a brokerage won’t affect me directly but I wonder how companies that approach either AFS or SCF expecting independent advice will feel if they are introduced to Aldermore without being told that they are significant shareholders.

Aldermore aren’t the first to try to buy market share by acquiring their own broking firm but it didn’t work out too well for the first factoring company that tried it and they quickly gave up the pretence and changed their subsidiary’s name to their own.

Presumably there are going to be a number of genuinely independent commercial finance brokers who will no longer wish to deal with Aldermore as they will be worried that their clients will find their way into the database of Aldermore’s broking arm and in all honesty I can’t blame them.