I was recently helping a business in Leicester source a suitable invoice finance facility after their bank owned invoice finance company had decided they no longer wanted to support.
The proposal was a challenging one for a number of reasons but I love a challenge and was confident that I could assist. I was let down by one lender who despite understanding the challenges on day 1 took the lead forward for 2 months and then declined it based on the same challenges I had advised them about on day 1. This didn’t help!
Anyway, another broker had got involved and introduced another lender who aims to do the deals that other lenders will not do. Their position in the market is a good one and they are a valuable source of finance to companies that perhaps would not be funded bo other lenders. However, they do charge accordingly and in this instance I did feel that a more traditional type of lender was appropriate.
I managed to secure an offer of invoice factoring from an independent invoice finance provider that was some £3,000 a month cheaper than the offer he already had from the other broker. The client was delighted and signed all the paperwork to proceed.
However, he had signed all the paperwork with the other lender having been advised it wasn’t legally binding until he owed them any money. This was the brokers advice rather than the advice of the invoice finance company concerned. Part of the documentation was a debenture that was promptly registered at companies house.
When it came down to transfer this debenture was a bit of a spanner in the works, although it shouldn’t have been! The lender that had registered insisted on £3,000 for the release of the debenture which the client promptly paid. In my opinion this debenture could have been cancelled by submitting a form to companies house.
There is an argument that my client led the other lender a merry dance and incurred them a lot of work and as such the fee was justified.
The moral of the story is be careful what you are signing with invoice factoring companies and be careful who you take advice from. The brokers advice in this instance was at best questionable.
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I have again come accross an independent invoice finance provider who has registered a debenture before being in a position to actually transfer the client. Unfortunately this meant that the existing lender, who did not have a debenture in place, was unable to make any payments to the client.