We had an enquiry last November from a company who had a successful relationship with an independent factoring company but had been tempted away to one of the bank factors with talk of cheaper rates.

Within 3 months the unapproved debts had risen from £700 to over £40,000 and it became apparent that despite paying for a full credit control service the factoring company were actually not doing much at all so the cost of the facility had risen whilst the lack of cash flow due to the increase in unapproved debts was slowly strangling the life out of the company.

I introduced the company to one of the independents who are known for their excellent service levels and thought that would be the end of his nightmare but unfortunately that was not to be the case. The new factor was never able to buy out the investment of the bank factor as the lack of credit control had left the ledger in an unholy mess.

As the factoring facility was plainly not working the company stopped sending invoices to the factor and and has been struggling to self fund for the last few months. Speaking to them today it seems that the outstanding factored debts now total over £160,000 all of which is overdue and unapproved.

The company now wish to take legal proceedings against the factor for non performance on the basis that they paid them for a full sales ledger service including credit control that the factor has failed to provide.

Although a factoring agreement will be worded in such a way that the factor is not responsible for anything I’m sure that would not hold up in a court of law if it could be proven that they were negligent but has anyone successfully sued a factoring company for inadequate performance?