In an article in the Sunday Times today it was reported that Payne Timber who had an invoice discounting facility with RBS Invoice Finance had been put into Administration as a result of the Bank reducing it’s invoice discounting facility from £500,000 to £150,000.
On another blog I read this weekend that three different suppliers to the automotive industry had their invoice discounting facilities reduced as the factoring companies had fallen out of love with the car industry.
These factoring companies are going against the spirit of factoring and invoice discounting as the whole idea is that funding increases in line with sales.
Obviously in a falling market when sales are down the levels of funding will also be reduced but to arbitrarily reduce facility limits as per the examples shown is the quickest way to ensure that their clients fall into the clutches of the Insolvency Practioners.
Fortunately there are still factoring and invoice discounting companies out there that don’t treat their clients in such cavalier fashion.
Ian
Invoice Discounting UK
I think this is just a sign of things to come as credit tightens even more and factoring companies that are bank funded will be forced to squeeze their existing client base. In Australia there are many reports that larger bank funded factors are shedding their smaller clients.
Oddly enough in the UK it seems to be the bank owned factoring companies that are getting rid of clients that no longer fit their new tightened criteria whilst the independents have either pulled down the shutters or are carrying on regardless.
I was out with a factoring company yesterday that still applied the same basic criteria as before which was primarily “If the client goes bust will we get our money back” which was quite refreshing to hear.