Factoring and invoice discounting news, views, warnings and gossip written for real people and not search engine bots
Today’s 1% cut in base rate to 2% will probably have negligible effect on SME factoring and invoice discounting clients as firstly many of the providers have already moved over to LIBOR as a charging rate and secondly many of those who have remained on base rate will have minimum base rates included in their agreements and these could well be 4% or 5% so any factoring client on 3% over base could still be paying 8% pa
Time to dust off those factoring agreements and check the wording
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.
One of the factoring company’s that I deal with is taking their top half dozen introducers out to lunch in December at the award winning Alastair Little restaurant in Soho. I came top of the introducer league table by a country mile but unfortunately I can’t make that date so he is going to take me out for a curry in Birmingham instead.
Why do I get this feeling that I’ve been shortchanged 🙂
The Sunday Times today reported that “doorstep lender Cattles had been warned of a possible credit downgrade by ratings agency Fitch over concerns about it’s funding position”
The group is in talks with it’s lenders about renogiating a £500m credit line that is due to expire next summer and is also trying to obtain a banking licence from the FSA which would allow it to start taking deposite from customers.
Perhaps these two factors would explain why subsidiary Cattles Invoice Finance is up for sale and we would re-iterate the comment that we made a couple of months ago that until the future has become clearer we would not recommend Cattles Invoice Finance to any of our factoring clients
I have now had a look at a factoring quote provided by RBS Invoice Finance to a prospective client and quite honestly I find their proposed charges outrageous.
The company have a turnover of £300,000 with five customers all equally spread and they have no history of payment problems. RBS have quoted for a recourse facility so there is no credit insurance involved and what’s more they want the client to do their own credit control. The minimum factoring commission of £6,000 pa is at least one third more than available in the independent sector and as if the outrageous setup fee of £1,500 wasn’t bad enough there is also a renewal fee payable on the anniversary of the facility of 1%
I have been in the factoring industry a long time and this is the first time that I have heard of a renewal fee but the real problem is that probably 95% of RBS Invoice Finance clients come directly from the bank and it never occurs to them that there might be alternatives that would offer a better deal so they just sign on the dotted line.
If this case is representative of RBS rates I would suggest that anyone considering a factoring facility with them should look around for an alternative quotation as they are very, very uncompetitive.
In this particular instance we will be saving the company about two thirds of the setup fee plus another third of the ongoing fees plus all of the renewal fee as none of the factoring companies that we deal with charge so outrageously.
Ian