I must admit that I smiled wryly when I read the notification from Companies House that SW Metalcraft Ltd had gone bust with an Administrator being appointed as that was the client that Working Capital Partners screwed me out of my commission on.
I don’t suppose that there are many within the independent factoring sector that don’t know the story as when I am introduced to people that I’ve never met before they often open with “You’re the bloke that got shafted by Perry Burns aren’t you?” For the sake of those that haven’t heard what happened the original article is posted here under the heading Working Capital Partners – brokers and introducers beware
The Administrator’s statement of affairs of WCP’s client is now available at Companies House and what a complete shambles it appears to be.
According to the statement the debtors totalled just over £627,000 and were estimated to realise “uncertain” which is a very unusual comment
Working Capital Partners are listed as being in for £400,000 which is a heck of a lot for a company with a share capital of just £1,000 and a negative P&L account according to their last accounts and one has to hope that this massive failure doesn’t impact too greatly on their other clients. There is a possibility that WCP had some credit insurance on the debt but with a Creditsafe limit of just £1,000 it isn’t likely to be much
The second largest asset according to the statement of affairs is a Directors Loan Account of £125,000 where again the collectability is marked as “uncertain”
With such an awful statement of affairs I look forward to seeing the Administrator’s progress reports to see just how much of these apparently dubious asset values will be collectable although my guess is that very little will be.
Anyone relying on a personal guarantee will be sorely disappointed as the director Simon Andrew Wadsley was made personally bankrupt on 29th October. There is a new company recently registered (6th September 2018) though called BSC Holdings Norfolk Ltd with the sole director being the intriguingly named Bridget Andrew Wadsley but what connection that will have with the recently defunct company is anyone’s guess.
When I was young my mother always used to claim that “what goes around comes around” and in this case it certainly seems that Perry Burns’ less than honourable behaviour has returned to bite him severely on the bum
As most factoring insiders will know First Capital Factors Ltd collapsed into Administration two years ago and whilst plenty of rumours were doing the rounds at the time nothing concrete ever appeared until last week.
First Capital Factors Ltd was a small factoring company run by the high profile David Marsden and was funded by means of a back to back arrangement with Leumi ABL Ltd plus loans from Thincats.
According to the press release issued by the Insolvency Service, Marsden colluded with the factoring company’s clients to raise false invoices and he then used these invoices to fraudulently raise £4.3m from Leumi ABL Ltd
Although one has a certain amount of sympathy for Leumi ABL for being defrauded they should possibly have spotted the signs earlier but my sympathies lie with the individuals in the Thincats syndicate who won’t see any of their collective millions back.
These weren’t all high net worth individuals who could afford to lose money but people like you and I looking for a slightly higher return on their savings than the miserly rates offered by the banks.
Whilst these individuals may have been aware that some companies perform better than others I doubt whether any of the individuals expected to be defrauded out of their savings by such a supposedly well respected person within the factoring industry who included the past chairmanship of the Asset Based Finance Association on his illustrious CV
If a year’s bankruptcy (now expired) and a ten year ban from holding a directorship is the sum total of Marsden’s punishment then he has got away lightly as forty years ago a similar thing happened at Bank of America’s factoring company and the two executive directors who orchestrated a remarkably similar fraud both ended up in prison for three and four years as well as the bosses of the companies that had participated in what the media called “The great loans swindle”
There must be more to come from this debacle as there was collusion from various clients who have also committed fraud and surely the staff at First Capital Factors must have had verification procedures in place for what I guess must have been substantial invoices.
In addition every factoring company that I have worked at have had monthly board and/or management meetings which have included detailed discussions on the client portfolio so I guess that this story has not reached it’s conclusion yet and there must be more people who jump every time the front door bell rings.
I have received a letter from Simplicity’s solicitors threatening legal action for defamation as they claim that I have made untrue statements about them on my blog.
They claim that concentration limits are common with factoring companies and cite an article by a factoring broker which was designed to paint a worst possible picture in the hope that readers would contact them to find them a suitable factoring company with further examples being provided from another factoring broker’s website which was published for the same reason.
They further claim that facility limits are finite limits as per a paper produced by ABFA without pointing out that they are like credit card limits and subject to renegotiation as and when necessary.
Simplicity are payroll funders providing back office facilities to recruitment companies in conjunction with working capital funding. That they should be trying to compare themselves to standard factoring companies is like trying to compare apples and pears as the products are similar but also different.
What Simplicity fail to mention is that there are several factoring companies that offer a back office facility and that it is these factoring companies offering a similar product to them that in general do not suffer from the disadvantages mentioned by Simplicity.
The solicitors have requested the following:-
In the circumstances, we urgently seek the following remedies from you:
Removal of the Article from the Website.
Publication of a suitable apology in a prominent position on the Website for a period of at least 14 days, and thereafter archived indefinitely so that it remains searchable.
Your undertaking not to repeat the allegations complained of.
I have removed the original post from the blog and I do apologize for not making it more obvious that I was referring to factoring companies offering a recruitment finance package in competition with Simplicity’s own product and not factoring companies in general.
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.
Lloyds 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.
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.
I 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.