Lloyds Bank Commercial Finance has just circulated a press release stating that any broker or introducer who introduces them to a factoring or invoice discounting client will receive a commission of 40% of their service fee for the life of the facility.
This is significantly higher than the industry norm and is potentially highly lucrative for factoring brokers many of whom will now start to introduce new clients to Lloyds Bank Commercial Finance for the their high rewards alone irrespective of whether that particular factoring company is the best fit for the company or not.
Regular readers of the Factoring Blog will be aware that my opinion of the average factoring broker is already pretty low having referred to their behaviour as vultures in my previous post but the likelihood is that many brokers will shed off their vulture like scavenging and take on new personas of the porcine kind as they queue up to feed at the trough that is Lloyds Bank Commercial Finance.
Unfortunately their behaviour will lower their standing even more as the main reason for the existence of specialised factoring brokers is to offer companies the benefit of their expertise and not to line their own pockets.
Discussing this press release with some of my factoring friends I was told by one that he had approached a new broker only to be told “Why should I deal with you when Lloyds Bank Commercial Finance will pay me so much more. That should really serve as a warning to any company who uses a factoring broker and finds himself introduced to Lloyds as it is highly likely that the introduction has been made in the broker’s best interests and not your own, which is a shocking state of affairs.
Another factoring friend asked who was ultimately going to be paying for this huge commission and they suggested that it was either going to be the client in the form of higher service fees or else the service levels would be pared back even more with an effective reduction in the factor’s sales ledger administration and credit control creating savings to fund the commissions.
A third factoring friend told me that a few of their introducers had already been in contact asking whether they would match Lloyds only to be told that they would gladly do so as long as the introducer didn’t mind them increasing the rates to the client to cover the increase as they didn’t intend to reduce their service levels to compensate.
Factoring Solutions prides itself on offering an ethical broking service only ever introducing clients to what we consider to be the most appropriate factoring company for their needs. We have never dealt with Lloyds partly because there are independent factoring companies that offer higher service levels at comparative costs and we won’t be starting to introduce business to them now despite the high rewards on offer from them.
If any company wishes to speak to an independent factoring broker who places his clients’ needs above his own please feel free to contact Factoring Solutions on 01827 707680
One of the Factoring Blog’s readers has a better memory than I as he kindly reminded me that just over four years ago I posted a small comment referring to the recent press release by Lloyds Banking Group stating that they are scrapping “all incentives linked to product sales in the latest attempt to clean up bad practices”
It’s interesting that they considered incentives linked to product sales as bad practices in December 2012 but now they consider paying considerably over the industry norm as a good industry practice