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

I have several comments to make on Mr 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 Mr 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.

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.

 

Factoring company sued for extortionate collect out charges

There have been a stream of complaints over the years about the alleged rip off charges imposed by some factoring companies on termination of their agreements, usually when the client has ceased to trade.

cash pileIn most cases there is very little that the client can do about it as if the company has gone bust the directors often don’t have the funds to launch a legal case so the factoring company gets away with it.

Termination charges have long been a large source of extra profit for many invoice finance companies with the chief executive of one such company telling me a few years ago that such fees made up 25% of their profits.

Finally one factoring client decided to do something about it as when Leumi ABL Ltd decided that a suitable fee for collecting out the ledger of their client Cobra Beer was an eye watering £1.216m but the guarantors of Cobra’s facility who would probably have ended up stumping up for the fees said that enough was enough and launched a legal case against Leumi.

Thumbs Down from Factoring BlogIt seems that the guarantors who had indemnified Leumi against all sums due and payable under Cobra’s invoice finance agreement (which included any and all termination fees which Leumi subsequently added to the account) paid Leumi the not inconsiderable sum of £950,000 but the factoring company deemed that not to be enough and demanded a further £490,000 but the guarantors had enough of the factoring company’s greed and launched legal proceedings.

When it came to court the judge deemed that Leumi’s actual costs in collecting out the ledger had amounted to £33,250 and that they should not have charged the client / guarantor and more than 4% of the amounts collected.

Far from having to pay the additional £490,000 that Leumi had demanded the judge decreed that the client / guarantor had already overpaid £735,000 and unless an appeal is launched it looks like the factoring company is going to have to refund a large sum of money. In addition to having to repay the vast majority of the fees charged by Leumi ABL it appears that they are also responsible for both sides legal fees which are rumoured to total £3m.

Leumi ABL don’t seem to be having a good year as in addition to having to repay these fees plus hefty legal costs they have also lost a substantial seven figure sum in the collapse of First Capital Factors which they were funding plus there are rumours doing the rounds of another substantial seven figure loss from the collapse of another of their clients and one must wonder how much more the parent company bank will put up with before pulling the plug or at the very least changing the senior management.

Although the Cobra Beer facility was probably invoice discounting with little or no sales administration provided by Leumi it never ceases to amaze me how some invoice finance companies can charge their clients a service fee for undertaking the administration of the sales ledger under a factoring arrangement then if the poor client ceases to trade they charge an additional (and often extortionate) fee for doing exactly what they were paid to do in the first place.

Hopefully this legal ruling will provide a salutary lesson to the greedier factoring companies who may well moderate their greed in the future.

Why brokers recommend Lloyds Bank Commercial Finance

Lloyds Bank Commercial Finance has just circulated a press release stating that any broker or introducer who introduces them to a factoring or invoice discounting client will receive a commission of 40% of their service fee for the life of the facility.

This 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.

factoring brokers feeding at the troughRegular readers of the Factoring Blog will be aware that my opinion of the average factoring broker is already pretty low having referred to their behaviour as vultures in my previous post but the likelihood is that many brokers will shed off their vulture like scavenging and take on new personas  of the porcine kind as they queue up to feed at the trough that is Lloyds Bank Commercial Finance.

Unfortunately their behaviour will lower their standing even more as the main reason for the existence of specialised factoring brokers is to offer companies the benefit of their expertise and not to line their own pockets.

Discussing this press release with some of my factoring friends I was told by one that he had approached a new broker only to be told “Why should I deal with you when Lloyds Bank Commercial Finance will pay me so much more. That should really serve as a warning to any company who uses a factoring broker and finds himself introduced to Lloyds as it is highly likely that the introduction has been made in the broker’s best interests and not your own, which is a shocking state of affairs.

Another factoring friend asked who was ultimately going to be paying for this huge commission and they suggested that it was either going to be the client in the form of higher service fees or else the service levels would be pared back even more with an effective reduction in the factor’s sales ledger administration and credit control creating savings to fund the commissions.

A third factoring friend told me that a few of their introducers had already been in contact asking whether they would match Lloyds only to be told that they would gladly do so as long as the introducer didn’t mind them increasing the rates to the client to cover the increase as they didn’t intend to reduce their service levels to compensate.

Factoring Solutions  prides itself on offering an ethical broking service only ever introducing clients to what we consider to be the most appropriate factoring company for their needs. We have never dealt with Lloyds partly because there are independent factoring companies that offer higher service levels at comparative costs and we won’t be starting to introduce business to them now despite the high rewards on offer from them.

If any company wishes to speak to an independent factoring broker who places his clients’ needs above his own please feel free to contact Factoring Solutions on 01827 707680

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