Construction recruitment fraud in the factoring industry

Construction recruitment fraud in the factoring industry seems to one of the growing problems within the the invoice finance world.

I had enquiries from two recruitment companies in quick succession towards the end of last year that were fairly obviously set up to deliberately defraud factoring companies and another over the weekend which is why I thought it time to put pen to paper.

What worries me is that some factors (including bank owned factoring companies) are so lax in their due diligence that they take on these fairly obvious fraudsters and end up losing money with sums in excess of £1m being lost by at least one bank owned factoring company and others being caught for lesser sums.

brokers try and punt these fraudulent deals around the market placeA further concern is that brokers try and punt these fraudulent deals around the market place either because they aren’t bright enough to spot an obvious bad un or else because they couldn’t care less if they can earn out of it.

The first of my enquiries telephoned to ask me to source a factoring deal for them. According to the caller they were a fairly new company but had £1m of orders for construction industry workers if they could obtain the funding.

I suggested one particular factoring company that would have been ideal for them but he told me not to contact them as he had already spoken to them. When I suggested that if I spoke to them he would probably get a better rate he was fairly insistent that he would deal with that company himself.

Comments like that tend to set my spidey senses tingling and it didn’t take long for me to find that a company in the same line of business run by a director with the same surname had gone into Administration owing a large sum to the factoring company that he didn’t want me to contact. What made it worse was that the director had been banned from running any more companies such had been his previous behaviour.

My most recent example of this type of company came via a contact form on my website so I had time to research the company before speaking to them.

The first oddity on the contact form was that the email address from the contact was from an Outlook address and not as one would expect from a company email address. When a contact form includes a link to a website it is natural to have a look at it but this time the website didn’t exist and according to Whois the domain hadn’t even been registered.

Like many contact forms it records the IP address and this one was in Oman.

Thumbs Down from Factoring BlogAccording to Companies House the company was registered in November 2019 and the first year’s accounts were filed just five weeks after the year end.

It was a most unusual set of accounts as it showed fixed assets of £1,813,000 debtors of £313,000, cash at bank of £411,430 and no creditors at all.

Although I said that I had time to research the company before speaking to them I didn’t actually bother to contact them at all as I value my reputation for integrity and in my 22 years as a factoring broker I have never once put forward any deal that I thought was wrong although there have been one or two that turned out to be fraudsters.

A dozen or more years ago I had a fairly new start telecoms company accepted and I went on holiday to lie in the sun dreaming how I was going to spend the £16,000 commission that I had invoiced before I left only to return to find the whole thing was a fraud but that’s another story

EDIT – Just five minutes after uploading this blog I received a phone call from the latest fraudster and told her that I didn’t want to deal with her enquiry to which she just replied “OK”

Big changes in the world of factoring

Many of us thought that 2021 would see quite a bit of consolidation in the world of factoring but much of what has happened so far and is rumoured to be happening shortly is far more than most had thought with the banks seemingly keen to get rid of their factoring portfolios entirely.

Late 2019 saw my least favourite factoring company (Pulse Factoring) acquired by Petra Group Holdings Limited  which was a company registered in the Cayman Islands so little if anything was known about it.

January saw Petra Group expand it’s UK portfolio of factoring companies by acquiring Calverton Finance which as I have previously mentioned was a company that I liked dealing with due to it’s excellent client relations and ethical management  and this month it was announced that Cubitt Trade Holdings LLC which seems to be another company whose ownership is obscured but is also part of the Petra Group has acquired a majority stake in another factoring company that I won’t deal with, namely, Regency Factors

In terms of the overall factoring market that is relatively small beer but the more worrying announcements and rumours concern the sale by Barclays of it’s factoring portfolio to the little known 4Syte Group coupled with the rumour that RBIF is divesting itself of it’s factoring clients with it rumoured to be giving them all six months notice to find them another home.

If that wasn’t enough rumours have now surfaced that the biggest factoring company Lloyds Bank Commercial Finance has also had enough and is looking to sell itself or at least it’s factoring portfolio. It will be interesting to see where that one ends up as I can only think of one factoring company big enough to swallow it up without causing indigestion.

There is more but unfortunately for every story that I am told about there are at least six more that I am asked not to put on my blog which is a shame but perhaps in time I can reveal more

4Syte and Barclays Factoring

I am sure that clients of Barclays factoring division were surprised to hear a couple of weeks ago that the bank had sold their factoring portfolio to the little known finance company 4Syte

It seems that quite a few of these clients are unhappy with the arrangements as they didn’t wish to be palmed off onto a factoring company that they had never heard of so have started contacting other better known factoring companies in an effort to be moved on.

I must admit that I knew very little about 4Syte so a little research turned up the fact that it’s a fairly new company headed up by Nick Sellars which was a name that I did recognise from way back as he was Managing Director of the late unlamented Aston Rothbury Factors which went bust just over ten years ago.

He then set up Platinum Funding which later morphed into Pulse Cashflow which as readers of Factoring Blog will know is my least favourite factoring company.

Instead of trading as a single company 4Syte seems to consist of a group with a separate company formed for each type of finance that they undertake with at least nine different 4Syte companies in the group with Balder Capital Ltd being shown as a person with significant control.

Barclays have always had an uneasy relationship with factoring as they were the last of the High Street banks to set up an invoice finance division and even that was very slow to get going and sizewise never got close to the other banks in terms of vanilla factoring clients and turnover and even their operations were unusual as they used a third party for much if not all of their new client Onboarding.

It seems that 2021 might see a considerable amount more of changes in the industry as rumours abound that factoring clients of RBIF have been given six months notice too so there will be a mad scramble amongst factoring companies and brokers to hoover up their clients too.

Factoring Solutions do not operate as ambulance chasers but any factoring client that is unhappy with their existing arrangements should feel free to contact us on 01827 707680 for an informal chat completely free of charge

 

The Calverton Pulse tie up

I am in a bit of a quandary due to a recent takeover in the factoring industry. I am happy to admit that Calverton Finance was one of my favourite factoring companies for certain types of client as their service levels were second to none and I had a lot of faith in the senior management team for the way that they went about running a factoring company. With very few exceptions clients that they took on tended to stay with them.

The Managing Director retired a year ago and the Sales Director left shortly thereafter which was a shame as they were both ethical, capable people that I had a lot of time for.

Rumours had been circling around the industry for a while that they were for sale but it was a bit of a shock to me to hear that the company that ended up buying them was the parent company of Pulse Factoring Solutions Ltd which is a factoring company that I have always adamantly refused to deal with

Pulse started life run by two ex directors of the late unlamented Aston Rothbury Factors which went bust in 2013 and for many years it had the reputation of being the lender of last resort with many of their factoring clients not lasting very long.

“Pulse” wasn’t an easy company to follow the fortunes of as there seemed to be quite a few companies bearing the Pulse name some of which didn’t last long before being dissolved and most changing their names at least once.

Most of the independent factoring companies are funded by back to back arrangements with banks but Pulse’s financing didn’t seem to be quite so easy to follow until three years ago when it’s financing was taken over by a company in the group that later acquired them.

Pulse Factoring Solutions Ltd is now part of the Cubitt Trade Holdings LLC group which itself is directly wholly-owned by PETRA Group Holdings Limited, a Cayman Islands limited liability company. PETRA Group Holdings Limited is wholly-owned by BlueCompass Management Partners LP, a Cayman Islands limited partnership.

Now you can see my quandary. One of my favourite factoring companies that looks after a number of my clients now tied up with a factoring company that has always been at the top of my dislike list.

Hopefully Calverton will be left to continue under it’s existing management and more importantly with it’s existing business philosophy but I will be keeping a very close eye on my clients there. One of the reasons that factoring companies like dealing with me is that unlike many of my broker competitors I don’t churn my clients on an annual basis in search of greater commissions for myself but if I find that the service levels are decreasing I will have no hesitation in moving my clients onwards and upwards.

Working Capital Partners – Administrator’s Report makes grim reading

The Administrators of WCP Finance (formerly Working Capital Partners) have published their progress report and grim reading it is too

Salient points include the fact that at the date of their appointment the company’s book debts totalled £1.1m and of that sum £745,000 is considered to be bad debt where either the customers have gone bust themselves, the invoices are disputed, long term repayment plans have been agreed or where “funds have been misdirected away from the company to borrowers’ bank accounts in breach of the funding agreement” (whatever that means)

It seems that at the date of the Administration 68% of the book debt was bad or doubtful which is a shocking figure and symptomatic of a very poorly run factoring company.

In addition it seems that a significant sum due from SME Tradeflow has been disputed. I am aware that when a company goes bust their customers will often try and find ways to wriggle out of paying but in this instance SME Tradeflow is owned by the very same Perry Burns who owned Working Capital Partners so it seems that his left hand is disputing the amount owing to his right hand.

Hopefully Mr Burns has given up trying to run a factoring company as he has registered The Electric Motorbike Company Ltd which last month registered a charge to Berkeley Trade Finance Ltd which is itself a fairly new company being registered in March 2019

It will be interesting to see how these two companies fare and I will watch their activities at Companies House with interest.

Additionally Mr Burns is also a director of Working Capital Partners Ltd (formerly WCP Capital Ltd) which is the result of a name swap prior to Administration plus a company called Confidential Invoice Discounting Ltd so let’s hope that both companies remain dormant