Factoring Termination Fees

Termination fees have historically been applied to factoring facilities if early termination has been desired for whatever reason, with the main reason tending to be the transfer to a different factoring company.

These termination fees would have been set out in the contract and would typically have consisted of the balance of the Minimum Annual Fee.

Extortionate Factoring Termination Fees

In recent years however some factoring companies have come up with new ways to increase their own profitability and have started posting what many consider to be extortionate termination charges through their clients’ accounts if that company were unfortunate enough to have to cease trading.

If that were not enough there are many complaints in the media that companies have been forced into Administration unnecessarily so that the factoring company could rape it for fees with some factors admitting that termination fees now accounted for a significant proportion of their annual profits.

Leaving aside the fact that by the time the factoring company and Administrators had pillaged the company’s reserves there would be nothing left for any of the creditors another aspect worthy of consideration in advance is the fact that if the termination fees outweigh the balances available then the directors personal guarantees may be called upon.

There has been quite a lot of comment in the media recently about what many people consider to be unethical practices regarding the charging of extortionate termination fees and the recent entrance into the market of factoring brokers owned by insolvency practitioners who introduce new clients to factoring companies in the hope of grabbing a share of the lucrative Administration work in return has come under the spotlight.

It seems that the brand name is no guarantee of ethical behaviour as one of the bank owned factors as well as some of the better known independent factoring companies are amongst the worst offenders with one of the high profile independents probably being the worst offender of them all and as there is no regulatory body the clients have no redress.

Ethical Factoring Companies – We Know Who which Factors are Completely Transparent

We would like to point out at this juncture that not every factoring company is quite so cavalier with it’s clients and many are quite ethical preferring instead to make their profits through the ordinary course of business.

Factoring Solutions prides itself on it’s ethical broking service as we refuse to deal with any factoring company that treats it’s clients in such a cavalier fashion and we only deal with the few factors that are utterly transparent so for a friendly informal chat with a factoring expert please do not hesitate to contact us on 01827 707680 completely free of charge as we never charge our clients anything for our services.