Factoring - Bank pressure and lost clients

Alan in Invoice Factoring | No Comments

I attend at least 2 networking events a week and in the general conversations with business owners I have found a disturbing number of businesses experiencing a very uncompromising attitude with their bank managers when it comes to the annual account and overdraft review.

These funding reviews often have managers implying or even threatening to withdraw the overdraft and pushing the business to factor their debts.

But why?

Well from what has been described to me the result is higher costs to the business and greater income to the bank. With the reduction in the bank rate and the problems that many of the High Street banks have got themselves into during the last 12 months the pressure is on for them to maximise their income.

One business acquaintance who supplies specialist services to solicitors and corporates throughout the UK illustrated the problems that can occur. He had been convinced by his bank to factor his debts just 12 months ago. He has to pay a quarterly fee that amounts to £12,000 per year. During the year he has never had to use the whole facility but because the bank has to have that amount available he still has to pay a fee. But the most galling thing for him is that in chasing his clients for money – the bank own the debt – the banks factoring arm have managed to upset many his clients with their aggressive approach and in consequence he has lost two clients. No surprise he has given them three months notice to ensure the factoring ends on the first year anniversary.

Leighton Wilcox