I was interested to read on the FSB Forum about factoring, how bad factoring is for businesses and how the FSB should actively advise businesses of this.

I am sure everyone agrees that the FSB promotes the best interests of small businesses. If indeed factoring is the nemesis of the SME then why do the FSB actively promote their own white label to members? FSB Factors is the white label factoring product of the FSB. They describe factoring as ‘ideal for small businesses’ and ‘more flexible than overdrafts’

The service is actually provided by RBS Invoice Finance and prior to 2007 I believe it was provided by Lloyds TSB Commercial Finance.

The FSB obviously feel that there are benefits to businesses in using an invoice finance facility and I agree.

I am invoice finance broker and openly admit that I take commission from invoice factoring companies for arranging invoice finance facilities. I am impartial and independent and I work with the whole market. I believe that this is the only way a broker can operate. The right lender will differ depending on each businesses requirements and circumstances.

So why do the FSB promote a facility via RBS? How do they choose the most suitable provider? What are their motivations?

Well the FSB and most trade organisations have 3 motivations when choosing any of their ‘partners’. Firstly, they want an added benefit for a member. This means that they want an offering that is exclusive to FSB members, i.e. 10% off for FSB members. This justifies joining fees and attracts new members. Secondly they wish to grow membership numbers which is why they look for benefits to members. However, if an organisation can offer them access to businesses who could be potential members this is a big advantage. The larger the membership the more power they have when lobbying. Thirdly they will look to generate income which is put to good use for the benefit of members.

While I have no doubt that the FSB’s actions are aimed at benefiting their members I am not sure that in promoting RBS as a one size fits all solution to invoice finance they are doing the right thing.

The invoice finance market is made up of a variety of lenders for good reason. each one has a unique offering and small businesses should use this to their advantage.