RBS Invoice Finance charges to small businesses

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I have just had a telephone call from a small company who were about to sign up with RBS Invoice Finance until she read our website and thought that she should talk to someone from the independent sector first.

The company are struggling a little due to the recession and turnover is down slightly to £300,000 per annum with outstanding debts of £50,000. RBS have made an indicative offer of terms but it wasn’t the factoring commission rate that astounded me but the setup fee of £1,500.

I don’t think that I have ever come across a setup up fee so high for such a small company as it equates to 0.5% of turnover or 3% of the likely funding line. I don’t know how they can justify this sort of charge when the independent sector would be charging about one third of that, especially when the customer’s ledger consists of five customers.

Royal Bank of Scotland can make as many public announcements as they like about their commitment to helping the small business sector but even Shylock would have been pleased to get away with charges like that.

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

Fairfax Gerrard in Administration

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Administrators were appointed to Fairfax Gerrard Holdings Ltd, Fairfax Gerrard International Ltd and Fairfax Gerrard Traders Ltd on 19th November.

This will undoubtedly affect all of their clients who may not be able to survive the sudden cessation of their trade finance facilities and may have difficulty in replacing them quickly due to the quirky nature of some of the finance company’s offerings.

Ian

Trade Finance UK

The factoring industry is closed this week

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Not much will be happening this week at senior levels in the factoring and invoice discounting industry as the ABFA (the industry’s trade association) is having it’s annual jolly conference and all the great and good in the factoring industry will be attending.

Where else would the self styled “UK based trade association” be having their conference in these austere times but Barcelona 🙂

 

It should be an interesting conference as more than one member of the ABFA isn’t writing any new business at the moment but at least one member might usefully save some money by combining the conference with a trip to Bank Santander to discuss takeover terms in what is probably the worst kept secret in the factoring industry.

Bank owned factoring companies are getting a bad press

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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