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Complaints

‘Bank Forged my signature then told me to pay £1.2m’

This is the headline of an article in the Sunday Times on March 14th, 2021. The article can be read here

 

In summary, a high court judge found that Aldermore Bank had tried to enforce a personal guarantee that was not genuine. The Sunday Times advise that a High Court judge found that Lynch’s signature on the guarantee was not genuine, but “signed by a person at the bank”.

 

Roderick Lynch had entered in to an invoice finance agreement with Aldermore. His business, Ruskin Private Hire, provided transport for disabled children and vulnerable adults in London.

 

Mr Lynch was made bankrupt.

 

Aldermore were ordered to pay Lynch’s court costs estimated to be £430,000. Lynch claims that this was because Aldermore pursued him under the forged personal guarantee.

 

In my opinion, this fits in with many instances of poor behavior from Aldermore and in particular their invoice finance arm. It has been written about previously on this forum and can be viewed here There seems to be a common theme of not supporting businesses, profiteering when they can and rushing in to deals that they don’t understand. In rushing in to deals that they perhaps don’t understand, the consequence for their clients can be severe. This seems to be demonstrated with the failure of Ruskin Private Hire and the bankruptcy of Roderick Lynch. Another example of this lies in the registered charges against Canute Haulage Group Limited. You can see Aldermore made an entrance with an invoice finance facility which they quickly pulled. Sadly, the disruption caused to the business likely contributed to it’s ultimate demise, in my opinion.

 

Take a look at some of their Trustpilot Reviews – click here

 

You may recall our previous story about UK Exim Limited and UK Exim Finance. The businesses owed millions to Assetz Capital and Archover respectively.

 

There was an article in the Telegraph about how Mark Runiewicz provided funding via these businesses to a business called Packaged Water Limited which was run by his partner Mary McErlain. The article can be reviewed here: https://pressreader.com/article/281642487623557

 

The administrators progress report for UK Exim Limited filed on 28th September 2020 shows a total shortfall of over £5.5m with over £2.4m of that due to Assetz Capital. You can see the report here: Administrator’s Progress Report

 

Mark Runiewicz and Mary McErlain continue to work together at SC Advisors. Given the potential fraud with UK Exim, UK Exim Finance, Packaged Water and the losses suffered by lenders it is interesting that Mark and Mary continue to work together to advise businesses. They advise that their business, “advises SME companies by arranging funding through the whole supply chain”.

 

Archover describe what happened as a fraud. In a response to an investor on a TrustPilot review, they advise, “The company you refer to is UK EXIM Finance (UEF) not EXIM. The company was not introduced by our parent company. As you are well aware this fraud has affected a number of other lenders as well as ArchOver but our monitoring team was the first to uncover it. UEF had been a legitimate borrower for a number of years until this year. As you are aware from the multiple updates from ArchOver we are pursuing a wide range of avenues for recovery with the full support of Hampden Group, who themselves are also exposed as a lender in UEF.”

 

It will be interesting to see what further action Assetz Capital and Archover take in these matters. It will also be interesting to see what the final outcome is in terms of recovery with UK Exim Finance Limited. The Administrators progress report can be viewed here: Administrator’s Progress Report

 

In summary it advises that at the date of appointment, UK Exim Finance Limited owed £4.74m to Archover. It goes on to say that Archover will “suffer a substantial shortfall”. There is a move to liquidate the business so it will be interesting to see what the final shortfall is. It would appear that Archover may have moved the debt into a separate SPV company and it would appear that they have made some progress in recovering some of the funds.

 

 

 

Convertibill are an Irish lending platform that are expanding in to the UK. They provide working capital finance against confirmed orders from credit worthy buyers and also against outstanding invoices.

As business finance brokers Funding Solutions UK Ltd have had a few dealing with Convertibill and it would be fair to say that they have not gone well. It would also be fair to say that we won’t be having any more dealings with them. I would question their honesty and integrity for a few reasons. Here is a brief description of some of our interactions:

We introduced a client who provided specialist type of marine funding. Convertibill signed an NDA as the client was worried that their product would be copied. Convertibill requested more and more information and the client was suspicious that they were merely trying to obtain information from them so they could copy their approach or learn more about how to fund this type of transaction. When the client raised this the enquiry was closed down and they refused to acknowledge the signed NDA. Patrick Reynolds CEO advised, “There is no NDA from June” and despite sending him a copy of the signed NDA he refused to acknowledge it. Our client is now taking legal advice.

We introduced another client who was looking to bridge an investment transaction that included funding from the Future Fund. Convertibill advised that they could help but that they required a £15,000 commitment fee to start the process. The client paid the £15,000 and then asked if they could change the transaction. This request was the next day. Convertibill advised that they could no longer assist and that they had spent the £15,000 on legal fees and on securing the required funding. In my opinion this is a nonsense and is pure profiteering. Again, our client is taking legal advice.

As a finance broker I earn money from setting up finance facilities for my clients. I had referred a client to Mark Runiewicz of Convertibill and specifically request that he provided a stand alone trade/purchase finance facility for the client as they were happy with their invoice finance provider. Mark entered in to talks with the client and then introduced them to 3 invoice finance providers. These 3 lenders were Skipton Business Finance, Optimum Finance and Gener8. We were never advised of this by Mark but they client alerted us to this. Strangely, Mark then claimed that Convertibill had now started to fund against debtors and that they would fund the full transaction. It is my opinion that Mark was trying to broker this invoice finance requirement for himself. With one lender I checked with the lead was logged in the name of Mark’s business SC Advisors Limited who would have received the commission had the transaction completed. Putting our situation to one side it seems strange that Mark is employed by Convertibill but is introducing an invoice finance requirement to other lenders. Even more strange when you consider that is what we do as a business!! Market Finance were the incumbent invoice finance provider and they refused to work with Mark Runiewicz and Convertibill. At the time this seemed harsh to me but having done some investigation it appears they may have been concerned with Mark’s previous involvement with other P2P lenders via his business UK Exim Finance Limited and UK Exim Limited. The information at Companies House would suggest that these relationships did not end well. Type these business names in to Google and look at the filing history at Companies House. It appears that lenders lost money and a significant amount due the activities of these businesses.

Something really doesn’t feel right about Convertibill. My advice would be to proceed with extreme caution. Arguably, there are other options out there so maybe explore those.

If you are reading this as a fellow business finance broker I would also proceed with extreme caution. There are questions about how client introductions are handled but I also have reason to believe that they work hard to find ways not to pay broker commissions and may indeed pride themselves on their ability not to pay brokers. At a senior level within the business there seems to be a dislike for brokers and a willingness to find ways not to pay brokers the agreed fees.

Updated 5 October 2020.

 

I was approached by Convertibill and asked to take the post down. The initial conversation included a threat of legal action for libel if I did not take it down within 24 hours. With a view to learning more about their side of the story and as a gesture of goodwill I took the post down. However, whilst explanations were offered they did not change my opinion of what occurred. What I have posted is based on my honest opinion.

 

In addition, there has been an article published in the Telegraph on 2nd October 2020 about the businesses that Mark Runiewicz has run and the potential losses they have caused in the P2P lending sector. The articles are in the images below:

 

 

Aldermore Invoice Finance is the 2nd incarnation of Cattles Invoice Finance. Initially they rebranded as Absolute Invoice Finance and now as the invoice finance arm of Aldermore Bank.

The most startling observation of Aldermore has to be the staff turnover. It is simply astonishing. In speaking with a previous managing director prior to the IPO we were told that the executive team were targeted on recruitment and on expanding the sales team in certain areas. This focus on expansion seemed to override the focus on looking after existing staff and they were leaving in droves. Good people from the invoice finance industry were joining and leaving very quickly. Some were even resigning without having jobs to go to.

Another worrying observation was the number of recruits they took from RBS Invoice Finance. A large proportion were from RBS and this was a team that had arguably caused some real issues there. The extent of the problems were somewhat overshadowed by the near collapse of the overall banking organisation but there were specific issues within the invoice finance arm that caused the then MD to lose his job despite his recent arrival.

Having had dealing with Aldermore Invoice Finance I would question their honesty and customer service. I have seen a client that they refused to assist with an increased funding request try to exit the relationship. The relationship manager involved was very aggressive and this resulted in a formal complaint to both Aldermore Invoice Finance and Aldermore Bank including their CEO Philip Monk. Astonishingly the individual involved was named on the formal complaint acknowledgement letter as the individual that would be investigating the complaint. Unsurprisingly he concluded his investigation and advised he had not found any wrong doing. The client wanted to leave to go to another lender that would provide unrestricted funding of their debtor book. Aldermore charged a hefty termination fee which goes against what is advised by the ABFA Code of Conduct. The ‘Guidance to the ABFA Code’ it states:

“3.2.3 Where a client requests termination of a facility without the required or any period of notice, even though Members may not have any legal obligation to agree, they are encouraged to give reasonable consideration to such request, particularly where continuation of the facility may cause hardship to the client.”

The relationship manager advised verbally that he did not care about the ABFA Code of Conduct and they would do as they pleased. This seems to be common practice and I have one client who was arguably forced out of business by Aldermore’s termination fees.

In terms of honesty I have personally had issues with senior members of the Aldermore team in terms of how they have handled enquiries. It would appear that honesty is optional.

There was a case of a large haulage company that was with HSBC and needed a new funder. There were several large players involved and all looked at supporting the business to some degree. However, the Aldermore offer was far more aggressive. One lender had been there doing due diligence for 3 days and was advised that Aldermore had only taken 1 day on their due dilligence. Aldermore funded the deal in January and almost immediately withheld funding. They were aggressive with the management team of the business and ultimately forced them to leave in March. Sadly, arguably due the restricted funding implemented by Aldermore, the business went into administration in the May.

I think you would need to question the competence of Aldermore.

One of the biggest issues Aldermore Invoice Finance has is defining what deals or transactions they can support. They don’t seem to command a particular position in the market. You could argue that they are not particularly good at anything and are more of a generalist. This seems to impact on their ability to win deals in the market and also on their ability to service clients once they are on board.

They also took on board a team from another lender that specialises in construction finance. One of the senior team members, who still works there, is a convicted shoplifter.

If you have a requirement for invoice finance it is safe to say there will be better options in the market than Aldermore. Do your research, look at reviews and take advice.

If you would like to share your experience with Aldermore please feel free to comment.

Favell Recruitment are a family owned business started by brother and sister Oliver and Alicia Favell. They are a recruitment company based in South Yorkshire that specialise in the construction sector.

The business started trading in 2014 and to finance it’s rapid growth they entered into an invoice finance facility with Aldermore Bank Plc. They set this up on a the Aldermore ABC product which is a fixed price facility and they had an overall credit facility of £50,000. Sadly, the facility did not generate the required working capital but when they looked to terminate the agreement Aldermore levied early termination fees.

Problems

The facility had run satisfactorily but they soon outgrew the facility. In order to double the facility limit to £100,000 Aldermore doubled their fee structure to £900 per month plus an additional 0.65% of turnover for bad debt protection. The facility was also restrictive as there was a 50% concentration limit on the facility and their top customer could represent more than 50% of their sales ledger. This put pressure in Favell’s cash flow as the facility was not generating the required cash.

Favell Recruitment felt that the facility was both restrictive and expensive. As a result Oliver looked to source a better structured facility. A facility was sourced from another lender that provided an increased facility limit, increased prepayment, increased concentration limit, full funding limits on all their debtors and also provided considerable savings.

Cost Comparison

Lender                                                        Aldermore                                         New Lender
Facility Limit                                            £100,000                                            £200,000
Prepayment                                              85%                                                      90%
Concentration Limit                              50%                                                      100%
Service Fee                                              £900 flat fee                                       1%
Bad debt protection                               0.65% of gross turnover                  Included in service fee
Discounting Fee                                     Included in flat fee                            2.5% over bank base rate

In terms of costs, if we analyse the fees paid by Favell to Aldermore in December we can see that despite borrowing just over £7,000 at the end of December having notified just £23,164 of invoices the fees for the month were £1,230.16. Of this, £900 was fixed cost service fee which represents 3.88% of turnover and this did not include the bad debt protection.
If the new lenders facility had been in place the costs would have been circa £450. This is a reduction of over 60% in costs. Due to the inflexible fixed fee arrangement and the low turnover in December due to the slowdown in the construction industry this may be somewhat skewed. However, the service fee element would have been just £231 compared to £900 and the additional bad debt protection.

If we assume a turnover of £700,000 and average borrowing of £75,000 the Aldermore facility would cost £16,260 versus the new facility of £10,650. Again a considerable saving of 35%.

Termination Penalties

Favell Recruitment approached Aldermore to advise that they wanted to leave. Sadly, despite the facility being restrictive and expensive Aldermore advised that there would be a termination fee.
Aldermore are members of the Asset Based Finance Association (ABFA) and on Aldermore’s own website they state that “as members of ABFA we take these commitments seriously and are dedicated to ensuring they are RESPECTED at all times.”

If you look at the ABFA Code of Conduct and more specifically the ‘Guidance to the ABFA Code’ it states:

“3.2.3 Where a client requests termination of a facility without the required or any period of notice, even though Members may not have any legal obligation to agree, they are encouraged to give reasonable consideration to such request, particularly where continuation of the facility may cause hardship to the client.”

There is obviously no legal requirement for Aldermore or any other ABFA member to allow a client to terminate a contract early. However, given that Aldermore could not fully fund Favell’s largest customer due to concentration restrictions, it could be interpreted that “continuation of the facility may cause hardship to the client” given that it was restricting profitable trading and growth with their largest customer.

Due to the restrictions on the facility and also what Oliver considered to be excessive fees, Favell Recruitment felt they had no option but to pay the termination fee to Aldermore to exit the facility.
Oliver Favell commented, “This is not a good way to do business especially after it appears they were overcharging us. We were paying a lot of money for a restrictive facility with a £100,000 limit and now we are paying considerably less for a £200,000 facility. All in all I would not recomend Aldermore to anyone ”

With a better structured and more cost effective working capital facility we wish Favell Recruitment continued growth and success.

Do you want to access invoice discounting but don’t want to provide a personal guarantee?

Invoice finance without a personal guarantee is available. You can contact Funding Solutions on 0845 251 4040

Many invoice finance providers insist upon a personal guarantee and others only insist upon a guarantee if you are factoring. This seems strange to me as the lenders risk associated with invoice discounting is higher than it is with factoring. However, the criteria for invoice discounting with these lenders if far more stringent so the personal guarantee is less important.

Why do lenders look for a personal guarantee?

A typical requirement for a personal guarantee will be between 10-25% of the overall funding line while some lenders will look for unlimited personal guarantees in the first instance.

The reason lenders look for a personal guarantee is to keep the directors interested in a failed situation. If a guarantor stands to lose money under a guarantee they will help the lender collect in outstanding debts. It may mean they need to dig out a proof of delivery or a signed timesheet to help resolve a dispute.

Are personal guarantees called upon?

Rarely are personal guarantees called upon. Invoice finance lenders are lending against outstanding invoices and their calculation of prepayment relates to what they feel they will be able to collect out in a failed situation. On that basis the outstanding debt is repaid by collecting out what is owed by customers. This can be a troublesome process so the directors or guarantors help is often vital and as already stressed the guarantee is there to keep them interested in assisting.

In fairness banks and other lenders are becoming far less reliant on personal guarantees than they used to. Mostly due to reputational risk, especially where the family home is the main asset underpinning a guarantee.

So do I have to provide a guarantee?

In short no. There are lenders available who will provide funding without a personal guarantee.

Shop around or use a reputable broker such as Funding Solutions.

Factoring Rates can differ dramatically from lender to lender. We will have a look at what variables impact on the pricing of a factoring facility and then we will look at why some factoring companies are more expensive than others.

What impacts on the service fee?

The service fee is what the lender charges for administering your facility and it is typically determined by workload. This is dictated by the number of debtors you have an also the number of invoices you issue. Turnover also has a huge impact on your service fee and typically the higher your turnover the lower the percentage service fee.

The discounting fee, what impacts on this?

This is the cost of borrowing and it should reflect the risk the company is taking. The total fee is made up of the base rate and the margin. Some lenders use the Bank of England base rate while others use LIBOR. Watch out also for the minimum  base rates which a lot of lenders put in place. The margin is often dictated by their credit policies and with negotiation can often be reduced.

These are the 2 main fees but it is important to be aware of additional fees and charges. Always consider total costs when looking at different offers. Please also consider what service is actually on offer and ensure it meets the needs of your business. Factoring rates are obviously important but so are service levels and facility structure.

We often receive inquiries from clients who are keen to transfer from one lender to another because the credit control is poor.

I am afraid to say that often the provider accused of providing a poor service is a bank owned factoring company. However, when we ask how the factoring company was chosen there is also a common theme. They were either chosen because that is who the business banks with so it was a default choice or because they were the cheapest.

Without going to the market it is almost impossible to understand what your options are. If you don’t understand what your options are then how can you make an informed decision?

If you have chosen the very cheapest option then are you really surprised that the service does not quite meet your expectations? Would you expect free champagne on an Easyjet flight or free home installation from Ikea. No, of course you wouldn’t.

Typically with credit control from a factoring company you will get what you pay for. The larger bank owned factors will typically fully automate their credit control and it will be done by automated letters and month end statements. They may call your largest debtors but it will be a hands off approach.

Other factoring companies will provide a hands on credit control service where they call each debtor and have open communication with you the client. This however is time consuming and as such the cost for such a service is more expensive.

When choosing a factoring facility it is important to understand what level of service you expect and choose a lender accordingly.