Nucleus Commercial Finance join the ranks of knockers

KnockerRegular Factoring Blog readers will be aware that I have a bee  in my bonnet about companies within our industry that promote themselves by knocking their competitors and I have already outed Market Invoice and Simplicity for these practices and now it appears that Nucleus Commercial Finance has joined this select band.

Not only have Nucleus just come out with a promotion designed to frighten people away from their competitors but I received details of their E Book in an exceedingly patronising email from someone that I had never heard of:-

Hi Ian,

When securing invoice finance for your clients, you need to make sure they understand the additional fees the finance might come with, and the total overall cost. Question is, are you aware of the potential hidden fees?

No hidden feesThe E Book talks about the hidden fees in commercial loans but those allegedly hidden fees include take-one fees so they are obviously talking about invoice finance. Whilst I don’t deal with every factoring company and are therefore not privy to their operations, the ones that I do deal with and that includes the independent market leader are quite open about their additional fees with at least one giving all prospective new clients a schedule of possible additional charges along with the agreement before the facility has gone live.

Examples of the OTT quotes include:-

The Arrangement Fee –

A very common one-off admin fee to cover the costs associated with arranging the loan. Many companies are caught off-guard by the arrangement fee as it is often not presented upfront in the quote.

The amount varies and can be substantial: anywhere from 1% to 10% of the total quote. Payment is required at the start of the contract.

I have never come across any company that has been quoted 10% as an arrangement fee as to be honest the amount is just ridiculous. Most factoring companies charge a fairly nominal amount, typically £500 or so to cover the cost of documentation.

The take-on fee

A one-off service charge for recovering payment owed to your company from outstanding customer invoices. When work has been invoiced but payment has not been received, financial assistance in the form of invoice finance can be considered – at a price.

This take-on fee covers the loan provider’s costs associated with providing you with the amount owed to you, allowing your business to run as usual, and assuming responsibility for the unpaid invoice.

How much does it cost?

Typically 2% of the total value of invoices. The larger the invoices, existing or new, the larger the fee.

No hidden feesWith the exception of much larger invoice facilities it is fairly common knowledge that most factoring or invoice discounting clients will pay two charges. A service fee based on the invoices factored and interest on the funds advanced. These fees will be the first thing that most potential clients will ask about and will generally be confirmed by the factoring company in a written quote prior to being included in the Agreement so to say that they are hidden is rather laughable.

Charge per invoice schedule (or charge to fund same day invoices)

What is it?

This fee is generally considered the most unwarranted of the lot. Simply put, it is the cost your company will pay to a financial institution when funds are paid on the same day the invoice is processed. This service is more often than not presented as part of the deal, without making mention of any penalty fees.

How much does it cost?

At a cost of 1% of the total invoice amount per transaction, this lack of disclosure is, in our view, dishonest business practice.

No hidden feesNucleus may claim this to be the “most unwarranted of the lot” but again they aren’t presenting a true picture. Most factoring companies operate on the basis that funds will be available 24 hours after the invoices have been received in order to give them time to carry out their normal checks and due diligence etc but they will occasionally allow their client to draw funds early but this will incur a fee. Speaking as an ex operations type I am well aware that clients that want their payments prematurely cause a great deal of disruption to the daily work flow and the practice is therefore deliberately discouraged.

The final page of the E Book contained an alleged case study supposedly showing how one of their clients had been the victim of alleged hidden fees but unfortunately the Case Study doesn’t have the ring of truth about it.

Case Study

One of our clients is a printing firm who, before they started working with us, had been granted a funding line of £200,000 with a discount fee of 1.5% above the base rate (0.5%).

• The money was to help them grow after winning a large new client.

• They thought their fees would total £75,000 over three years.

Their loan facility contained several hidden fees:

This meant:

Arrangement fee – 5%

Survey/audit fee – £500 every 3 months

Trust account charge – 0.2% of paid invoices

Take/on fee – 2% of invoice value

They paid £10,000 as an arrangement fee and £4,000 as a take-on fee for invoices they brought on board

Every quarter they paid £500, adding up to £6,000 over the three years

They paid £2,550 for using the trust account their invoices were collected through

The true cost of the loan was £97,550 – a massive 30% increase on what they thought they would be paying!

 As I have already mentioned the case study doesn’t have the ring of truth about it as firstly they were allegedly looking at the cost over three years which is highly unusual but makes for a larger figure in the case study and secondly all of the costs and fees that they are complaining about will have been outlined in the original Offer Letter as well as the Agreement that the directors signed.

I do wish that companies such as Nucleus, Simplicity and MarketInvoice would promote their themselves by outlining what they have to offer and not by publishing half truths about what their competitors are allegedly doing and if I may finish by offering some advice to Nucleus on the wording of their emails I would suggest as someone who has been in the invoice finance industry since before the sender of the email was born that you look at the wording of future communications more carefully as I doubt whether I am the only grey haired broker who doesn’t like being patronised.

EDIT – A couple of interesting facts came to light after I published this blog post thanks to my ever helpful readers and they can be found in the comments section

Interesting changes to invoice finance trading platform

One of the more high profile growth products in the invoice finance industry is the use of invoice trading platforms which is a form of invoice finance that is becoming better and better known thanks to the intensive PR efforts of one of the major players.

Of the two major players I far prefer the Platform Black operation to that of Market Invoice as the company is run by experienced factoring professionals who are available to speak to if there are any queries or questions whereas as far as I can gather Market Invoice is run by a sophisticated piece of software and the customer service is all but non existent judging by the complaints received from dissatisfied users who have tried it but prefer the offerings of companies with people that they can talk to.

Invoice trading online, a disaster waiting to happen?

I have often thought that invoice trading platforms are a disaster waiting to happen as very little (if any) due diligence is done on the invoices being sold by at least one of the major players and if any invoices become uncollectable it isn’t the trading platform that will suffer as it’s not their money anyway but it’s the investors who will lose out as they invariably have no in depth knowledge of the background or validity ofo the invoice that they are funding.

approved by factoring blogPlatform Black have come up with a rather novel concept by offering to underwrite the first 10% of any losses suffered by an investor which I think is as admirable as their comment that they should “man up and put some skin in the game” is absolutely dreadful.

The fact that they are claiming to have only suffered one bad debt in the last 15 months is testament to the benefit of having the company run by factoring professionals even if they seem to have the PR skills of a Chicago rapper.

Long may this continue.

More factoring company dirty tricks

Since I wrote my last piece concerning a factoring company acting less than respectably I have been forwarded an email sent to most if not all of the clients of a spot factoring company by those masters of self promotion Market Invoice Ltd

From: Thomas Sutcliffe
Date: 21 October 2015 13:29:54 EEST
To:
Subject: MarketInvoice
Hi *****

I believe you are currently using **************** as a spot invoice finance provider.

MarketInvoice work similarly but we are on average 50% cheaper, don’t take debentures or guarantees, have higher advance rates and are much quicker at getting the funds to you.

We have a quick online application if you want to see if we can fund your business. https://p.marketinvoice.com/app#/seller/account/create
It’s free to do and should only take a couple of minutes. Thanks.

Kind Regards
Thomas Sutcliffe
Business Development

Leaving aside the ethics of approaching the clients of a competitor to tell them that you are cheaper (which is highly debatable) Market Invoice are also claiming that they don’t take debentures which again is untrue.

It is a fairly simple matter to conduct a search at Companies House to find details of all the companies that a factoring company has a charge over and interestingly enough if one were to do the same to Market Invoice as they have obviously done to others you would find that the company that allegedly don’t take debentures have actually taken quite a few as follows:-

06059488 Absolute Edge Ltd
08239256 Annecto UK Ltd
08732701 Applebridge Construction Ltd
OC348485 Barlows (Retail Electrical Solutions) LLP
08768452 Barlows Retail Limited
07706549 Blucon Limited
07268881 Build4me Limited
06746083 Byyd tech Limited
08257527 Cable Power Limited
07988462 CM One Ltd
01494452 Computer Remarketing Services Ltd
05465993 Concorde Solutions Ltd
03271609 Concrete Media Ltd
07782581 Crafts Bargain Corner Ltd
08502710 Critical Resource Ltd
07632876 Direct Office Contracts Ltd
04220936 Deamtek Ltd
08863706 East Midlands Energy Services Ltd
08016588 Elimco UK Ltd
08881132 Est Renewables Ltd
04452584 Focus Scaffolding Ltd
07331792 Freedom Renewables Ltd – In Administration
05487099 Golf Bookers Ltd
03907607 Gradweb Ltd
07003407 Greenbuy Energy Ltd – In Liquidation
04849603 Greencyc Ltd
08295766 Greenoke Energy Ltd – In Liquidation
05698290 Gyrocom Ltd
07646296 HeadsGRP Ltd
06936063 Hooper Productions Ltd
07373180 Ice Academy Global Ltd
02939105 Ice Energy Heat Pumps Ltd
05136537 IHS Corporation Ltd
08136988 Insulation NE Ltd
04731727 ITS Projects Ltd
04349192 LCC Deployment Services UK Ltd
04708094 Maynards Electrical Contractors Ltd
03713679 McKinney Rogers International Ltd
07109707 MP Energy Ltd
03848698 Osprea Logistics Ltd
07556396 Patchez Ltd
06060169 Peerius Ltd
03135186 Phoenix Electrical Engineering Services Ltd
05367566 Pixel Projects Ltd
SC327304 Prater Contracts Ltd
06619874 Property & Training Solutions Ltd – In Liquidation
03000135 Ralph Coleman International Ltd
08067061 Rebel Minds Ltd
06741422 Reconsulting RTC Ltd
04933736 Resorthoppa UK Ltd
03402188 RNR London Ltd
08667253 SIS Digital Media Ltd
06894877 Site One Ltd
07437386 Somo Custom Ltd
06860380 Somo Ltd
07419084 Specific Heat (London) Ltd
07774640 Swiss Bullion Ltd – currently subject of winding up petition
08327554 Synchro Software Ltd
SC355209 Taylor Hopkinson Ltd
08214283 Tesla Energy Services – In Liquidation
05896266 The Knowledge Engineers Network Ltd
08236274 Threen Site Services Ltd
06761659 Trendstream Ltd
07250861 Twincentric Integration Ltd – currently subject of winding up petition
07326023 UK Room (London) Ltd
05711612 Woods Environmental (Leeds) Ltd

That’s quite a lengthy list for a company that allegedly don’t take debentures and I sincerely hope that all of the many factoring companies and brokers reading this aren’t going to “do a Market Invoice” and approach them all to try and pitch them to change providers but if they did I suppose that it would simply be a case of karma.

I recently expressed concerns in another blog post that perhaps due diligence on debts put forward for funding to internet invoice discounting companies was either not done or was inadequate and that fingers might be burnt as a consequence. If a normal factoring company funds debts that aren’t recoverable for any reason they stand to lose money but in the Market Invoice business model it’s the online investors that stand to lose money if a debt is irrecoverable and a look at the documents filed by the Administrator of Freedom Renewables Ltd at Companies House show what a dicey business it can be if the proper homework isn’t done as it seems that one or more invoices issued by the company that were funded to the value of £633,790 are the subject of dispute by the customer and the remaining non factored invoices which probably come under the terms of the floating charge seem to be a bag of brown stuff too.

Links

Statement of Administrators Proposals

Notice of Statement of Affairs

MarketInvoice using competitor’s domain names as keywords

Marketinvoice has launched a new concept in invoice finance but having had a look at their website I’m not too keen on what I saw there.

My regular readers will know that I have a bee in my bonnet about what I consider to be unethical activities on the internet and often wonder whether unethical marketing and promotion is coupled with unethical behaviour in other aspects of a company’s activities.

There are a couple of factoring brokers who have web pages designed to attract searchers looking for specific factoring companies which I consider to be unethical but there again many factoring brokers will do just about anything to earn a buck anyway.

Yesterday whilst searching on Google for “rbs invoice finance” I noticed that the third entry down the page was from MarketInvoice and curious to see why an invoice finance company would have a web page covering one of their competitors I clicked on the link.

It would seem that MarketInvoice have pages and pages in a section of their website laughingly titled “Learning Centre.” Each page is devoted to one of their competitors and is heavily keyword linked and they include a number of real gems, two of which I have cut and pasted below having first removed the extensive keyword linking:-

This is wrongABN AMRO Commercial Finance
Originally the company was known as Venture Capital and has been part of ABN AMRO, thesecond largest bank in the Netherlands, since 1992

IGF Invoice Finance
Headquartered in Paddock Wood, Kent, with offices in London and Leeds, IGF Invoice Finance are a company that offers flexible finance solutions for businesses. They are single invoice finance specialists and offer a number of financial products including selective invoice discounting and factoring.

For the benefit of anyone from outside of the industry who might be reading this ABM AMRO were never called Venture Capital and IGF Invoice Finance are not single invoice finance specialists.

In addition to each of the factoring companies having their own page there is another page where summaries of each of the lucky 11 recipient’s pages appear although it does seem that the wording is identical.

This webpage is divided into two section, the first headed “Bank invoice finance and factoring” with the sub heading “Primarily this is because all factoring facilities’ funding comes from the same capital providers, the commercial finance divisions of the major high street banks.”

The listing for High Street banks commences with the aforementioned ABM AMRO but try as hard as I can but I still haven’t managed to find a branch on any high street near me.

The second section covering independent banks and factoring companies has the interesting sub heading:-

“Fundamentally there is some competition on service between the independents; however, once a company is signed up and committed to an 18 month facility, there are significant switching costs, and the factor effectively holds a monopoly over the business (the debenture entered into prevents any other funding without the factory’s prior written consent).”

The two comments that I find interesting are firstly the crafty suggestion that companies commit to an 18 month facility which is most certainly not true with the majority of factoring companies that I deal with and secondly that “the debenture entered into prevents any other funding without the factory’s prior written consent” which apart from the laughable typo is true but makes me very nervous about their whole business model if they feel that they can buy and sell trade debts without the security of a debenture.

As I started off by saying, one can expect unethical behaviour by the type of factoring brokers that don’t have ethics anyway but this is the first instance of unethical marketing by an invoice finance company and the lack of ethics in their internet marketing coupled by the elementary mistakes that they have made lead me to the conclusion that MarketInvoice is one company that I won’t be dealing with.

 

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