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.
As often happens in cases like this there was another side to the story and it turns out the company in question is known within the factoring industry as they have already been less than honest with more than one factoring company already and the present factor seems to be putting their own exit strategy in place by carefully checking everything as well as keeping the funding levels as low as possible.
Whilst I’m sure that we could find another factoring company I don’t deal with anyone that I know to be dishonest so will be dropping this enquiry like a hot brick