I have been approached by a client today who has a ‘non-recourse’ facility with an independent invoice factoring company. This is to say they have a credit insurance policy to cover their debtor book. As such the client should not incur any bad debts as long as they operate within the given credit limits.

However, it has transpired that a customer of our client has gone under owing them £150,000. There was a £150,000 credit limit in place so the client thought everything was covered.

The insurance company has now come back and queried certain procedures relating to timesheets and the dates of invoices and our client has provided everything that has been asked.

In short they insurance company has paid £60,000 and is disputing the balance on what appears to be minor technicalities.

It is not my place to say who is in the right or wrong here but the important facts are that the independent invoice finance company advised the client he was set up on their insurance. Now that insurance company has disputed the claim the client is now left owing the lender for the balance of £90,000.

Without access to the full facts it is hard, in fact impossible, to establish blame. The important thing is to highlight that you should request full terms and conditions for any credit insurance that your lender arranges for you. You should ensure this has been received and understood prior to signing any agreement. Importantly you should also ensure that they can provide the limits that you require.