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I expect that a few factoring insiders raised their eyebrows in September 2013 when Administrators were appointed to a supposedly successful fairly high profile factoring broker owned primarily by a husband and wife team plus one other with all three being directors.

Although it doesn’t affect the general public it doesn’t do the whole factoring industry any favours when companies that people turn to for financial advice end up going bust especially when one of it’s directors is banned from holding office for four years

I noticed at the time that shortly before the appointment of the Administrators a new company had been formed by two of the three directors of the existing company with just the wife not appearing to hold office but according to her LinkedIn profile she is employed as a researcher for them.

Operations were switched over to the new company so seamlessly that to the outside world it was just a change of name and it wasn’t until a further two years had passed that the full horror story unravelled by way of Administrators reports

It transpires that the factoring brokerage plus an associated company that went bust at the same time had racked up huge debts to HMRC of hundreds of thousands of pounds with one of the directors having an overdrawn directors loan claimed to be in excess of £400,000

Full details are available at Companies House here under Statement of administrator’s proposal 19th November 2013

The matter was treated seriously enough that one of the directors has now been disqualified as a director for four years as well as being made bankrupt. Full details of the disqualification and it’s underlying reasons are available from the disqualified directors database

Most factoring brokers don’t go bust in such a spectacular manner as they tend to modify their life styles in line with the success or otherwise of their broking and if they can’t make a success out of factoring they quietly shut up shop and do something else.

In this instance there is something not quite right as a debt to HMRC in excess of £400,000 is huge but that pales into insignificance compared to an overdrawn directors loan of £400,000 plus and it sticks in the craw that these people are still advising companies on financial matters with that sort of history behind them

Three years I blogged about alleged problems that Aldermore were having in their Maidstone office to be told by “Nigel” “just going through a period of change and re-organisation, new staff and procedures are being introduced and a normal (better) service will be resumed as soon as possible”

Fast forward three years and Aldermore seem to be at it again as the over worked and under rewarded staff in the Maidstone office (their words, not mine) have been told that they are today entering into a 30 day consolidation period and that the office may close in December when the lease expires on the premises. This will mean that the back office functions of Credit Control and Cash/Invoice Processing may all move to the Manchester office so Clients can expect yet another fall in service during this transition.

My insider carried on to say that “After working for Aldermore (prev Absolute) and Cattles IF before that I would strongly recommend against anyone seeking employment with the company, given my experience with them. I cannot speak for all employees, but can confirm that this is the general feeling of lower grade employees. Perhaps you can warn Clients that this is on the cards so that they do not suffer yet again from another restructure. When will Aldermore get it right??”

Aldermore are not one of my favourite factoring companies and murmurs often reach myself as well as other brokers of staff unhappiness and tough underwriting criteria and as readers of this blog will know they threatened to sue me for posting something rather humorous albeit completely true on the Factoring Blog

A friend of mine sent me a link to an article written by a factoring company who were claiming to be about to revolutionise factoring by abolishing value dating on customer payments for interest charges and also by eliminating termination fees.

I was rather amused by their statement that the “average customer with an annual turnover of £6.7m, being charged 3% would pay an additional £3,865 per annum with a lender who withheld value for debtor receipts over a five day period”

The amusing part was their claim that the “average” company using invoice finance had a turnover of £6.7m as that sort of annual turnover is anything but average for an independent factoring company as ABFA’s own statistics show that 82% of all companies using factoring or invoice discounting fall into the turnover range of zero to £1m

By my calculations a saving of £3,865 on a turnover of £6.7m plus Vat equates to 0.048% of turnover which might make it easier to calculate savings over the total package.

Scaling the figures down to a more realistic “average” turnover of just 10% of the suggested average would cut the savings down to just £30 per month.

The second part of the press release claims that they are “also launching a new contract which removes termination fees.  The ground-breaking contract provides customers with certainty of funding for a 12 month term, whilst simultaneously allowing them to give only 28 days’ notice should they wish to leave early, without incurring any termination fees”

Personally I think that there is about as much spin in that paragraph as there was in Nigel Farage’s promise to resign if he failed to win a seat at the General Election.

I’m willing to bet that “certainty of funding for a 12 month term” means something completely different to a customer than it does to the factoring company as to my mind “certainty of funding” means exactly that and not that they will fund invoices subject to, subject to, subject to which is what the factoring company mean.

I find the so called abolition of early termination fees interesting unless it means that they are abolishing the Minimum Annual Fee as the majority of early termination charges relate to the balance of the minimum annual fee that hasn’t been charged yet and I’m willing to bet that they aren’t abolishing that.

The final part of the press release concerned a new contract that they were bringing in which in addition to the above also formalized their position on “collect out” fees by stating that it “includes a substantially reduced ‘collect-out’ fee, charged at 10% of the outstanding borrowing amount when applicable”

What that effectively means is that in addition to the factoring commission that supposedly covers the cost of sales administration including credit control if you are unfortunate enough to go bust they will levy an additional charge of 10% of the outstanding debts to do what you have already paid them to do.

The average client turning over £6.7m could have outstanding debts of £1m meaning that the factoring company will charge an additional £100,000 to collect in those debts which is 26 times what the company have saved you in their value dating costs.

The reason that I titled this blog post “quiet revolution” is because the factoring company involved is promoting these ground breaking changes very quietly using such vehicles as the Solar Sister blog.

Although it may appear to the contrary from what I have written the factor is actually one that I like and deal with but no-one from there has actually bothered to tell me about this quiet revolution so I’m guessing that none of their other introducers know about it either. It is my normal practice to name names but on this occasion I will respect their obvious wish for privacy and will keep it confidential.

This morning I received yet another email addressed to Factoring Solutions telling me some of the benefits of factoring and how it could improve my working capital but this time inviting me to contact invoicefactoringnow.net for a quote.

Naturally my curiosity was aroused so I had a look at their website and found that it was just a single page and contained no details at all of either the name or address of the website owners but invited me to fill in a form which would allegedly result in me receiving some quotes for factoring.

I checked out the ownership of the website to find that it had been registered four months ago but the ownership was hidden behind a nominee in Panama (just like the last one) which normally implies that they have something to hide. The website is also hosted in USA which is unusual for a company supposedly trading in the UK and what is even more curious is that hidden away in the website coding is the telephone number 1 973-917-8002 which is obviously not a UK number.

Hopefully no-one receiving an email suggesting that they apply for a factoring quote would be stupid enough to do so on a website that contained absolutely no details about who they were applying to with no name, address or telephone number on the website and again hopefully any potential applicants will check them out on Google first and with a bit of luck will come across this blog post.