Factoring companies short sighted attitudes

In the current economic climate factoring companies are finding new clients harder to come by so they are supposedly making a bigger effort than ever before to hang on to existing clients although too many take a short sighted view to earning profits which works against long term profitability.

I was chatting to a factoring company salesman last week who happened to mention that they were in discussions with a client of a competitor who was being “ripped off” (his words, not mine) by his existing factoring company.

The company started factoring a couple of years ago as a new start and paid an appropriate factoring commission for the small turnover and risk. In the intervening years turnover had grown to £2.5m and they were still paying the same rate .

factoring company commission rateUnless there were serious problems with the facility I think that everyone would agree that a commission rate for a new start turning over £150,000 is completely inappropriate for a company that the factor has two years ledger experience of and has grown fifteen fold so in my mind it serves them right that they are about to lose this cash cow and I can readily understand the factoring company salesman’s righteous indignation

Two days later I had a phone call from another company who had a remarkably similar story to tell as they started factoring four or five years ago when turning over £250,000 and were given an appropriate rate for the size plus a facility limit of £200,000 which was quite generous at the time.

The reason for the call to myself was that this company had also grown significantly to it’s current level of £2.5m turnover but not only was their factoring company unwilling to offer much of a rate reduction they had also refused to increase the facility limit.

The client was effectively operating on an Initial Payment of 25% and was so hamstrung that they had resorted to borrowing money to fund the gap that factoring was supposed to fill.

What made this interesting was that the factoring company involved was the very same one that was trying to take the moral high ground on the first case.

factoring company short sightedSpeaking as someone with a predominantly operation background I find this sort of greed to be very short sighted as whilst both factoring companies have earned a high income in the last twelve months if they had been less greedy they would have continued to earn a smaller income for potentially many more years.

I speak to a lot of factoring company salesmen and they all agree that life is tough at the moment yet there are salesmen for two factoring companies whose first few clients will not help to grow their employer but will simply replace clients that their company’s shortsightedness has lost them.

If any factoring company thinks that will get away with excessive rates for long they are mistaken as there are a number of brokers out there who spend their day contacting factoring company clients to find any excuse to move them on and thus earn themselves a commission.

That is not the business model of Factoring Solutions as we don’t cold call anyone but if you feel that your company is being charged excessive fees please feel free to contact Ian Johnston on 01827 707680 for a friendly, informal chat with no obligation whatsoever and of course, completely free of charge at all times

A factoring broker’s unproductive day

I had two telephone calls yesterday enquiring about factoring.

The first was a recruitment company who had a funding and back office facility with a back office funding company that I had never heard of but who had been causing them problems for a while with their poor service which was why they were now looking to change.

I don’t really like these back office companies that obtain their funding by “refactoring” with a proper factoring company as not only does the client lose part of their identity but also any problems suffered by the funder can filter down to the client whether the fault is theirs or that of another client.

This particular funder registered a charge to RBS Invoice Finance six years ago but six months later that charge was satisfied and a further charge granted to Bank of Scotland.

Two and half years later that charge was satisfied and a further charge registered to Lloyds TSB Commercial Finance but that only lasted nine months until the business transferred to Leumi ABL where it remained until transferring yet again to Close Brothers eighteen months ago.

Hardly a steady business relationship and the big red flag at Companies House stating that the Annual Return is overdue doesn’t inspire a great deal of confidence either.

I suggested that the company might be better off utilising the services of one of the factoring companies that ran their own payroll services so there was no hidden middleman to potentially upset the apple cart and that would also have another positive advantage that the company would regain their own identity instead of being subsumed into the funding company’s own identity but the lady that was talking to me decided that she didn’t want to operate that way and was happy as she was but would prefer a different funding company.

It was fairly obvious by the conversation that she wasn’t the decision maker but was happy with the way that things worked currently and didn’t want to work with a proper factoring company.

Fortunately I’m too long in the tooth to have to argue with someone who clearly thinks she knows best so I ended up telling her that regretfully I couldn’t help her.

A couple of hours later I had another call from someone looking for a factoring company who wanted to know what my charges were. I explained that I was a broker and my job was to source the most suitable factoring company for his particular needs and there would be no charge for doing that to which he replied that he wanted to contact factoring companies direct and didn’t wish to use a broker. I wished him good luck in sorting the wheat from the chaff and finding himself a factoring company that performed as well as they claimed and ended another unproductive call.

Hopefully today might bring enquiries from people who aren’t quite so set in their ways and might listen to someone who knows what he talking about

Christmas entertaining and marketing foolishness

The Christmas entertainment season is now under way and yesterday I was a guest at Bibby’s Birmingham office bash where we all met in a well known hostelry in the city centre prior to moving off to a restaurant for lunch.

Christmas drinksThere were probably twenty of us milling around when a chappie came in and wandered around looking lost until he came up to us and asked “I don’t suppose that you lot are Ultimate Finance” at which I laughed and said “You’ve got the dates wrong as that’s tomorrow”

Mein host then suggested that as he was here he might as well have a drink with us and as one of the original invitees had dropped out he may as well join us for lunch, which he subsequently did.

I held up posting this until such time as it was unlikely that anyone from Ultimate would read it prior to them all meeting up and cross examining their guests to save him embarrassment.

I was invited to today’s do but unfortunately I couldn’t make it which is a shame as I would have liked to watch ********’s embarrassment when he spotted me there 😀

On a completely unrelated note I had a telephone call this morning from Rachel at Impact Marketing who wanted to make me rich.

UnbelievableShe said that they had been acting for a factoring company and had been so successful in generating business for them that the factoring company could no longer cope which is why they had targeted Factoring Solutions as a replacement to act for.

When I politely suggested that there was no such thing as a factoring company that couldn’t cope with new business and most were struggling to attract sufficient new clients she became quite indignant and suggested that just because I was struggling that doesn’t mean that other factoring companies were, whereupon she wished me a Merry Christmas and the line went dead.

It’s a shame that people like Rachel have to resort to bull**** as I doubt whether anyone would be either taken in or be impressed by such blatant rubbish and it’s also a shame that she didn’t do a couple minutes of homework first whereupon she would have found out that Factoring Solutions wasn’t a factoring company.

Of course if there is a factoring company out there who has been so inundated with enquiries and new business that they can no longer cope please feel free to get in touch with me and I will happily post a retraction as well as offer to look after the excess leads that they can’t cope with.

Some factoring brokers are a joke

Some factoring brokers are a joke as I found out last week when I had a phone call from someone who had read some of my posts on an internet business forum and wanted advice on which factoring company he should deal with.

He had already approached another factoring broker thinking that they would introduce him to the most appropriate cash flow solution for his own unique funding requirements as per their claims on their marketing material.

factoring feedbackThe reality was far different though as he was inundated with telephone calls from at least half a dozen factoring companies all of whom claimed to offer him exactly what he wanted.

Unless I am mistaken the prime role of the factoring broker is to add value by helping the prospect to negotiate the maze of different offerings. How can putting half a dozen factoring companies in touch with the prospect add value as he could just as easily pick half a dozen names at random from Yellow Pages and cut out a middleman that has served no useful purpose.

For the sake of the uninitiated a factoring broker will receive a commission from the successful factoring company for the life of the agreement which can often be for several years.

It is a highly competitive market nowadays with more and more factoring companies and brokers chasing a limited pool of prospects but in recent years companies looking for factoring are now approaching more than one broker so the craftier brokers are trying to cut out the competition by putting more and more factoring companies in touch with each prospect in order to reduce the possibility of another broker winning the business.

This is wrongIs this ethical? Of course it isn’t as the broker isn’t adding any value to the transaction and they are acting primarily in their own interests.

Those that introduce more than one factoring company to the prospect will often claim that they do so in order that the prospect can select the one that he feels most comfortable with but the truth is that he will discuss his requirements with a salesman who will tell him what salesmen often do but once he has signed up he will be dealing with the operations department who could and often do act completely differently.

This particular factoring broker isn’t a one man band but a high profile company who is also an affiliated member of ABFA – not that this means anything nowadays.

Whilst this article isn’t meant as a sales pitch I would like to point out that 90% of people approaching Factoring Solutions for advice will be introduced to the single factoring company that in our opinion and with the benefit of years of experience will offer the best fit for them. On rare occasions it may not be immediately obvious whether a traditional facility or spot factoring would be the most cost effective solution so we introduce the prospect to one of each.

I may not win as many deals as the broker listed above but at least I can sleep well at night knowing that Factoring Solutions has always acted in the best interests of the prospect and not their own interests

Factoring awards – oh no not again

Most of my regular readers will know that I have a bee in my bonnet about factoring awards. It’s not the concept of industry awards themselves that I object to but the fact that they tend to be awarded to the most inappropriate factoring companies with many awards being won by the company who can drum up more people to vote for them than any others.

factoring company of the yearMy main complaint is that factoring companies can stick logos on their marketing material claiming to be award winners which will often fool people into thinking that the company in question is genuinely the best in it’s field when frequently they are anything but.

The most recent awards short list to come across my desk was the Insolvency and Rescue awards and the short list for Asset and Invoice Finance Provider of the Year was as follows:-

Gener8 Finance
Hitachi Capital Business Finance
Secure Trust Bank Commercial Finance

I have seen some unusual shortlists in my time but the above just about takes the biscuit.

Gener8 Finance is a company that I refuse to deal for reasons that I won’t go into in public.
Hitachi Capital Business Finance is a factoring company that has a good reputation for service levels but I didn’t think that they had much of an appetite for companies with a chequered financial history such as those that may be generated by the insolvency and rescue profession.
Myinvoicefinance is known as a small broking outfit although they may fund the odd client or two themselves and finally
Secure Trust Bank Commercial Finance which has only been trading for a few months.

A few of my factoring buddies attended the prize giving dinner and I am reliably informed that when the winner was announced it was met by a good deal of sniggering from many of the tables who wondered whether their good fortune had anything to do with the fact that they were sponsoring some of the other awards.

To save me starting another blog post on the same subject I recently received an email from Wealth & Financial International telling me that “after months of voting, research and hard choices they had finally decided on the worthy winners of this year’s awards, celebrating the service, skill and dedication of individuals and firms across a multitude of financial disciplines and sizes; from local heroes to national treasures, from single-office firms to international juggernauts, we celebrate them all.

I am pleased to announce that Factoring Solutions has been awarded “Recognised Leader in Specialised Factoring Brokerage – UK and now I will proudly adorn this great honour on my website but no sniggering please 😀

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