Factoring and Receivers

Factoring companies take a charge over their client’s assets as security. Many will take this security only over the book debts but the belt and braces merchants will take a debenture over everything in sight.

The debenture gives the factoring company the right to appoint an Administrator and many have used this privilege as a “get out” when things aren’t going as well as they first hoped.

It is food for thought that an examination of Administrator appointments from the public records will show huge disparities in the ratio of Administrators appointed to number of clients by some of the factoring companies; far more than the statistical average would indicate.

Anyone potentially interested in factoring their invoices  could be placing their company at unnecessary financial risk by joining forces with one of the factors who are more active than normal in the "Administrator market".

Naturally we know who these companies are and have never placed business with any of them.

Minimum Annual Fees

The use of the Minimum Annual Fee has increased dramatically in recent years to the extent that most factors now insist on a Minimum Annual Fee for all of their facilities but this can hide a couple of potential problems :-

Firstly, some factoring companies are not particularly selective when taking on new clients and will take on the most inappropriate cases.

Frequently the additional burden of factoring costs will ensure that these companies do not survive long and when they cease trading (even after a month) the factor becomes entitled to the balance of the Minimum Annual Fee.

Secondly, the craftier factors will insist on an Agreement that cannot be terminated for twelve months, with three months notice thereafter.

What the client tends not to realise at the time is that the day after the anniversary date, the factor is entitled to another year's Minimum Annual Fee which means an effective lock in for two years or paying a penalty.

Please click on this link to see why some factoring companies offer a poor service