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Santander Invoice Finance is obviously the invoice finance arm of Santander Bank. Unfortunately they are not a company that I will be recommending at this stage.

Having rebranded their banks under one banner they bought the small independent invoice finance company called Liquidity and rebranded as Santander Invoice Finance. At the time this raised a few eyebrows and was seen as dipping their toe in the water by many.

I have had a few dealings with Liquidity and unfortunately they were not good ones. The feedback from clients was poor and their communication was equally poor. This poor communication was a criticism of clients and something that I experienced personally along with an air of arrogance.

However, I did have hopes for the business under the Santander banner. They have recruited new sales staff some of whom I know personally and are well respected in the industry. There is plenty of room for another bank owned invoice finance company and I was keen to see what they had to offer. I was hoping for a well funded lender with a flexible approach and a quick turnaround. Unfortunately, I discovered it was business as usual with miscommunication and a poor understanding of what they could and couldn’t do.

I approached them on behalf of a client looking for a £2m invoice discounting facility. I was assured early in the process that they wanted to support the proposal and they did a survey at the clients premises. While a few issues were highlighted they remained supportive and confirmed to me on a friday that the deal was underwritten and a formal offer letter would be produced the following tuesday as monday was a bank holiday. A job well done – or so I thought. No offer letter was sent on Tuesday and late that night I was informed that the deal had actually been declined. In fairness this decision was appealed and Santander Invoice Finance did make an offer but it was vastly different to the original offer and required that the client inject his own funds into the business and provide a personnal guarantee for £300,000. This was simply not feasible and I sense they knew that.

The consequence was that the business was potentially left without a funder as their existing lender no longer wanted to support them as they didn’t like the sector.

I accept that these things can happen but unfortunately I sense that little has changed at this invoice finance business even though the Liquidity name has been dropped and the big brand banner of the world 8th largest bank (by market cap) was attached to it. I am sure that things will improve at Santander Invoice Finance and I feel that the invoice finance market will be better for it. However, my personal opinion is that I wouldn’t want to be a Santander Invoice Finance customer just yet.  The new structure is still being tweaked and the new staff are settling in and trying to learn the processes or hopefully develop processes. As such I feel that the planned growth will mean turbulent times are ahead and until things settle down I feel that there are other lenders who can offer the same facilities from a more stable base.

I feel that there are some quality independent invoice factoring companies who will provide a better service level and a more robust sales process at this stage. The other high street banks have some good invoice finance offerings also but as always it is important you select the best lender to suit your business and it’s needs.

I certainly won’t be recommending Santander Invoice Finance to any businesses in the near future.

I recently met Philip Padgham on a corporate day with a firm of accountants. Various people were singing his praises and a contact of mine asked if I would try using his invoice finance company Partnership Finance.

I had a chat with Phil who explained that as a finance company they were fast moving and decisive. They also claim to offer an excellent level of service. Yes, I had heard it all before but as it happened I had a client who had been let down at the last minute by Absolute Finance. (Strangly Absolute Finance had taken 2 months to decline a deal based on information they had been aware of on day 1.)

Anyway, I presented the opportunity to Phil and he visited them the very next day which was a friday. They then surveyed the deal on the Monday and approved the deal by credit committee on the Wednesday. The client is delighted. I am impressed. From first visit, through to survey and then on to formal approval by credit committee in 4 working days is fantastic.

A big ‘thumbs up’ for Phil Padgham and his colleagues at Partnership Finance.

The International Accounting Standards Board (IASB) have proposed changes that could mean that asset finance could be more difficult to obtain. The Finance and Leasing Association (FLA) advised this could impact heavily on the economies recovery as it relies heavily on investment in capital equipment. 

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Aldermore Invoice Finance was announced today as the new name for Absolute Invoice Finance that was previously Cattles Invoice Finance. While not a new invoice factoring company it is now part of a bank which can offer asset finance and commercial mortgages.

Aldermore Bank is described as ‘the new British bank’ and was formed by the merger of Ruffler Bank Plc and Base Commercial Mortgages. It is wholly owned by a private equity firm AnaCap Financial Partners Plc and it targeting savers by offering attractive rates and SME’s through asset backed lending.

Personally I have never been sure about Cattles and more recently Absolute Invoice Finance mainly due to pricing, credit appetite and having been let down a few times recently. They are assuring everyone of the same level of service so I am not sure that is a good thing.

That said, alongside invoice factoring and invoice discounting they have asset finance capabilities and offer both residential and commercial mortgages and may be the best lender for some clients. They can certainly look at more asset classes than most of the independent invoice finance providers. They are also claiming to be very liquid and open for business so it will be interesting to see how things progress.

I wish them well and hope that things do improve. It is always good to see lenders develop new capabilities and bring new offering to SME’s.

If you are looking for an invoice finance facility and want to know what options are available to you contact Smart Factoring Quotes today.

Invoice factoring is a type of working capital facility used by over 42,000 businesses in the UK according to the Asset Based Finance Association (ABFA). For the vast majority it is a valuable source of working capital that helps smooth their cashflow. However, I do hear the odd horror story and as such thought that I should talk about some of the pitfalls that can occur and how best to avoid them or deal with them.

Invoice factoring companies have to limit their risk so that they do not lose money and as such only certain types of debt are suitable for factoring. They also set certain parameters for the facility that are monitored on an ongoing basis. Importantly most , not all, factoring comanies will sign clients up for a 12 month contract period.

So let’s have a look at some of the more common pitfalls or complaints from clients.

Turnover has dropped and as such the factoring minimum fees are coming into effect and proving expensive. It is important you have a grip on what your turnover will be but I accept that crystal balls are hard to come by. Turnover is a major variable when calculating fees and typically the larger the turnover the lower the percentage service fee paid. To prevent a business forecasting a £10m turnover and the associated pricing but actually producing a turnover of £300,000 the invoice factoring company will implement a minimum fee. Unfortunately if a business loses a major customer or the market moves against them turnover can drop dramatically and the minimum fees can prove expensive. In this instance it may be possible to renegotiate with the lender for an increased percentage service fee but lower minimum fees based on the new turnover levels. In essence you are asking them to reprice based on the new variables of the business.

Concentration limits are proving restrictive – one of the parameters I mentioned above is a concentration limit. This is the percentage of your ledger that is outstanding from a single debtor. Some lenders restrict this to 20% while others are perfectly happy to provide funding against a single debtor. It is imperative that this is understood from the outset. Obviously your ledger can change over time so it is important to flag any issues in to your factoring company early on. Unfortunately they are not always accomodating. I recently experienced an issue with Venture Finance where a scaffolding client of mine won a large contract and anticipated a concentration issue for the coming months. He approached Venture Finance who took over 3 months for any kind of a response. As a result my client has tendered his termination.

Debtor Limits are Restrictive – it is important to remember that invoice factoring companies want to lend money but they have to assess the credit worthiness of your customers and set credit limits accordingly. If you have an order from a customer who is not credit worthy it may be tempting to deal with them. However, the advice offered by your factoring company may well limit your risk of bad debts. These limits can of course change over time and as a result credit limits can be reduced in some instances. This can mean that by dealing with some customers you are not receiving the funding that you may have expected. It is important to look at the credit limit of any customer prior to accepting an order. It is also important to have a lender that responds quickly to credit limit requests.

Early termination fees – I hear a lot of complaints about early termination fees and I have to say in some instances I do see excessive ones. Lenders will typically look to recover the fees they would have earned until the end of your contract and as such these can be hefty! The key is to set up a facility that works from the outset. Do your research, understand the fees and how the factoring facility operates. If you are looking to leave because the facility doesn’t work there may be room for negotiation but if you are looking to move to an alternative provider for reduced fees it is unlikely to be viable.

Collect Out Fees – in the event of business failure a lender will collect out what they are owed from your customer base. They will do this as quickly as they can to minimise the risk of bad debt and this is good for business owners as they will usually be supporting by way of a personal guarantee. The lender will levy a charge for this and it is usually a percentage of the ledger value. This can be a substantial sum as high as 15-20%. I have seen some lenders charge this fee even when they had no money advanced to the business at all. In part this fee can be justified but is often excessive in my opinion. However, it will have little impact on the directors or owners in most instances as it simply reduces the amount available to creditors. It rarely impacts on the business owners pocket. This does not make it right and the impact should always be considered.

As other pitfalls crop up I will add to this post.

The key is to arrange a facility properly from the outset and understand what parameters/conditions are in place and why. Understand how they can impact on the funds generated and on your business.

As an invoice finance broker I am always available to answer questions and assist where possible.

I have recently been posting on an FSB Forum on a thread about factoring and invoice discounting.

From a personal perspective it was disappointed to read the stories and the criticisms that have been levelled against the invoice finance industry. That said they are valid opinions from business owners that feel that their business suffered and in some instances failed because of the actions of factoring companies.

I am an invoice finance broker and I benefit directly from my clients taking up invoice finance facilities with the lenders I introduce them to. My posts obviously have to be read with this in mind. That said I do believe that I have tried to be balanced and fair in my assessment of the industry and the issues businesses need to be aware of.

The negative feedback genuinely saddens me and I can honestly say that to date none of the things described have happened to my clients in terms of forced closure. However, I have seen some eye watering fees applied in a business failure situation where they can only be described as excessive.

In context though there are roughly 42,000 users of invoice finance in the UK and the vast majority are happy clients. That will however be little consolation to the businesses that feel mistreated.

I was reading the posts on a forum hosted by the FSB about factoring and invoice discounting. As someone who is actively involved in the invoice finance industry it did make me cringe a little.

There were numerous posts from business owners and the odd person in the invoice finance industry including myself. The most passionate posts were from the owners of businesses that had got into difficulties and ultimately failed. They described how invoice finance companies had appointed advisors charging huge fees, appointed insolvency practitioners charging huge fees and/or had charged huge termination and collect out fees.

It does seem as though some invoice finance companies will levy these hefty charges when a client is in danger of failing. They are legally entitled to do so but I am not comfortable with the manner in which they do so.

The rationale behind collect out fees is to allow a lender to apply resources to effectively collect out their position. I have no issue with that. However, this fee can often be as much as 10% of the ledger value rather than the amount outstanding. In some instances the workload may well justify such a fee but these instances are few and far between. So why are lenders charging these fees? Well in short and in my opinion because they can.

The forum had some post putting the blame at the door of independent invoice finance companies which I thought was unfair. Some of them are guilty of this but not all and the banks are also actively involved in this practice.

By way of a recent example I had a client who owned a Scaffolding business and they were using invoice finance from a large bank provider. For good reasons they were restructuring and trading through a seperate limited company which in effect would be a phoenix. This had been well managed and the invoice finance facility had been run down to zero and cash was available to pay creditors. All good news and honourable. Unfortunately the bank concerned had a very black and white policy and could not finance the new company as it was technically a phoenix. As such the facility was ceasing and there was to be no ongoing relationship so the bank took advantage of the terms and conditions and charged a fee of 10% of the ledger value as a collect out fee. That resulted in a fee of £16,000 for collecting out what? Well, nothing as they had no outstanding balance. Who would have thought I had scaffolders calling bankers cowboys?!?

What is the effect on these businesses and their directors? Well in most cases I suspect the impact is nominal as any money collected in and not charged in fees would be distributed to creditors including HMRC. However, in some instances directors may well have benefited and my scaffolding client was a good example – it was money that would have ended up in their pocket. Either way I think it is morally wrong to charge for a service that has not been provided.

This practice is gaining publicity and tainting the name of a very good industry that is a valuable source of working capital for many thousands of UK businesses.

I recently set up this forum with a view to sharing some insight into the invoice finance industry with business owners who are already users of invoice finance or invoice discounting.

On another site I was criticised about using the term forum and it was stated that this was a blog about factoring and invoice discounting.  It was also implied that I was only using this blog/form  for self promotion.

In part all the comments were true but I would like to claify what the Invoice Factoring Forum is about. I feel that businesses deserve a better understanding of how invoice finance works as a facility, how invoice finance companies operate, the benefits of such facilities and also the potential pitfalls. The site is aimed at being constructive and positive with a view to benefitting business owners seeking such a facility. In my role as an invoice finance broker I see many scenarios and also see various problems arsie which I have to sort out and as such I thought I would share my experiences (both positive and negative) for the benefit of others.

As I am posting opinions then I accept that it is perhaps more a blog than a forum but at the same time I would welcome posts and discussion from business owners who are looking to ask questions and share experiences for the benefit of others. These posts can be positive or negative feedback about invoice finance and the companies that make up the invoice finance market however all I ask is that they are constructive with a view to helping other business owners. On that basis I welcome discussion and feel that it is in essence a forum.

The site is new and the format is not very user friendly but the content is genuine and we are working to improve things. As it is new it also lacks comments and discussion which only serves to ehance the feeling it is a blog so for that I apologise.

I am an invoice finance broker and I am proud of the service I offer clients. I offer independent and impartial advice to businesses with a view to explaining to them what options are available to them. I explain the pros and cons of each option and ensure my clients understand the total costs of the each facility along with their security and administrative obligations. From there I allow them to make their own informed decision about what is best for their business. One of these options is always not to take up any of the facilities I have suggested and I always respect that as only the owner of a business can make that decision.

I feel that my posts on here are balanced and offer a genuine resource to business owners who are looking for additional advice.

If I have used the wrong terminology then I apologise but my motivations remain good.

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