Factoring and termination fees. ABFA response

According to an article in today’s Sunday Telegraph Kate Sharp the chief executive of the Asset Based Finance Association (ABFA) has claimed that they intend to bring in a new code of conduct in January whilst indicating that the association still haven’t a clue what is going on under it’s nose by it’s members by questioning the extent of the problem that everyone seems to know about except the ABFA

Unfortunately the new code of conduct will be heavily watered down from what many people wish to see as they will not be outlawing the sharing of termination fees with brokers claiming laughably that it’s “against competition law”.

I suspect that the real reason could be found under the list of affiliate members / sponsors of the ABFA on their site who comprise many of the brokers who’s noses are firmly in the factoring trough and are quite happy with the status quo

Factoring and the recent bad publicity

Most of the industry will be aware of the recent bad publicity that factoring has had in the quality press and of course many will be laughing at the discomfort being felt by one particular factoring company but whilst the so called revelations are obviously damaging to that factoring company the fallout out is also damaging to companies looking at factoring for reasons that may not be so obvious.

Two of the case histories used appear to portray the factoring company in a very poor light but most people in the industry will read between the lines and it was fairly obvious that one of the companies mentioned was pre-invoicing and whilst I’m not sure what the other one was up to there was obviously a major problem there if the company attended a meeting with the factoring company accompanied by a friendly insolvency practitioner.

What is annoying about the recent bad publicity is that there is one particular factoring company that I refuse to deal with as I have severe reservations about their ethics and I believe them to be a company that has profited more than others from the demise of their clients judging from the huge number of complaints that I have received about them. This is not the factoring company that has featured in these press stories

I have no doubt that the salesmen from this factoring company will have downloaded the press stories to their laptops and if they hear that a company that they are negotiating with is talking to the other company they will show them the articles in order to win the deal for themselves with the result that all of this adverse publicity will be helping the rogue factor get their claws into yet more unsuspecting companies.

There are industry practices that I am not happy with and would like to see curtailed and most of them centre round the early termination of factoring facilities whether through the insolvency of the client or through the desire of the client to change factors.

Many of the problems within the industry are actually driven by greedy and unscrupulous brokers who hold the factoring companies to ransom. Some of the insolvency practitioner owned outfits make it quite plain to the factors that if they don’t give them the lucrative insolvency work they won’t receive any leads from them whilst some of the very high profile broking firms insist on such high introductory fees that it makes it unprofitable for the factoring companies to take on their introductions which often leads to them looking at alternative ways to increase their profitability.

Perhaps ABFA could gather the factoring companies together and get them to all agree to a maximum commission level to be payable to introducers which might then result in brokers giving enquiries to the most appropriate factoring company and not the one that pays them the most.

Wishful thinking I know

Lloyds TSB scrap sales incentives

It was widely reported in the press last week that Lloyds Banking Group are scrapping “all incentives linked to product sales in the latest attempt to clean up bad practices”

I wonder if the announcement will include their factoring and invoice discounting subsidiary Lloyds TSB Commercial Finance Ltd as if they are no longer going to pay commissions on new accounts that is going to affect at least two of the high profile factoring broking outfits who have grown fat on introducing companies to their own bank in return for a sizeable commission.

Recent factoring deals

A friend of mine remarked recently that one particular factoring company provides information for the “recent factoring and invoice discounting deals” section of a certain factoring publication on a regular basis but each block of deals always bears a remarkable similarity to the previous ones.

If you have a close look you will see that they have signed up yet another Northern recycling company so I think that by now they must have cornered the market in the area for this industry 🙂

October must be the month for awkward customers

We were approached by a company earlier this month looking for a combination of trade finance and invoice discounting as they had just received a substantial contract that they would have difficulty in funding.

Whilst I’m sure we would have no problem placing the business in principle this chap refused to divulge the name of his company, the name of the customer or any other details whatsoever and the only meeting that he would agree to was in a motorway services station.

Number two was involved in the construction industry, turning over a couple of million with only a few major customers. When asked if she could let the factoring company have sight of the contract the toys flew right out of the pram. I didn’t realise that there would be so much work involved said she continuing that she wasn’t sure that she wanted to bother any more.

What makes it worse is that there are still ten more days to go in October