Bank owned factoring companies are getting a bad press

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

Factoring interest rates

With the Bank of England’s announcement that Base Rate will be reduced by one third to 3% many clients of factoring and invoice discounting companies will be looking forward to lower interest charges but for many of them the wait will be in vain.

Many of the factoring companies will express their discount charge as a percentage over Base but most will also include a minimum Base and for quite a few that minimum is 5%

Due to their own internal funding problems quite a few of the major factoring companies (including more than one High Street bank subsidiary) have recently moved to charging their clients as a percentage over Libor so this cut will not do anything for them either.

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