Factoring companies

Factoring facility limits being squeezed by independents now

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Most of the recent bad publicity about factoring and invoice discounting companies having their facility limits reduced concern the high street bank owned factoring companies as they revert to their banker’s mentality when the going gets tough but it isn’t just them that are restricting their clients’ funding as we had an enquiry from a client of an independent factoring company who was getting into financial problems because his factoring company wouldn’t increase his facility limit to allow him to grow.

The company is involved in the recruitment industry, has been trading for a year and is struggling to turn over £1m a year as their factoring company are restricting their facility limit to £100,000 and refusing to increase it. The company have been awarded further contracts to supply more staff in January but are on the verge of turning away the business as they can’t afford to fund it as the factoring company who claim in their marketing material that one of the advantages of factoring with them is “Flexible finance that grows as your business grows” are not living up to their pledge.

I won’t name the factoring company quite yet just in case there is more to the story than meets the eye (there often is) but we have arranged for one of the independents with a more commercial outlook to visit on Monday so I will report back on the outcome at a later date.

Factoring company required to factor the invoices of…..

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a company acting as lead generators in the litigation of the misselling of payment protection insurance policies. Like the medical reports businesses that we have seen before this case involves fairly long credit periods with the customer taking up to eight months to pay but the customers are established multi partner firms of solicitors and not one man bands. Each case is validated by the solicitor before it is taken on and once accepted my client’s fee of £400 is payable win or lose.

The company is turning over £200,000 pa and even if every invoice wasn’t paid until eight months the debtors wouldn’t be more than £128,000 and a 50% IP would result in an investment of only £64,000

If anyone is interested in taking a closer look at this case please contact me.

Summary of the Asset Based Finance Association (ABFA) meeting

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One of my contacts told me that the highlight of the annual factoring jamboree currently being held in Barcelona was a lecture by a couple of Americans on mezzanine finance in which they appeared to have little grasp of what the subject was that they were lecturing on with each of them often contradicting the other when he had made a mistake in his presentation.

It would seem that the number of representatives from factoring companies was dwarfed by the huge delegation from the world of insolvency as they utilised the opportunity to try and butter up the factors all in one place