Our client is a merchant purchasing fish from trawlers at the end of each week. Online orders are received from hotel and restaurant chains, which are fulfilled over the weekend.

The client had been using the services of a large independent factor and seemed to have a competitive factoring agreement in place with a 0.9% service rate but is this what they were really paying?

The Factor was aware that payments required on a Friday would exceed the current funds available because order fulfilment and invoice would not take place until the weekend. Despite this clear trading pattern, the factor was charging an additional 5% overpayment fee each week.

In addition, any invoices over 60 days old would be subject to a second charging of the service fee, commonly known in the industry as a re-factoring fee. It is worth pointing out, that Aston Rothbury dislike re-factoring fees because a client is being charged for a factors incompetence and inability to collect outstanding payments! It is a practice that is far too commonplace.

We were able to establish that in a single month invoices totalling £145,000 were incurring re-factoring fees of £1,631 and overpayment disbursement charges of £4,461. In total the client was being charged £6,092 at an equivalent rate of 4.2%.

Aston Rothbury’s solution
At survey, we were impressed that the business had survived under such a burden and quoted for an invoice finance facility with credit control at a rate of 1.4%, with the cost of overpayments built in. There would be no re-factoring fee as we believe it is our responsibility to chase debtors to pay within the terms set by the client and we are confident in our ability to do this.

On paper it appeared that the client was getting a much better deal from the other factoring company, with their service rate of 0.9%. In reality, our facility is demonstrating factoring costs of around one third of that of the other factor, which is a huge difference to that originally quoted.

Aston Rothbury is committed to transparent pricing and it frustrates us that far too many of our competitors are prepared to quote one figure to attract business and end up charging another through a list of unfair, hidden charges. We want our clients to be successful because in the long run this benefits all parties. We don’t see them or their problems as an excuse to maximise our income, irrespective of the damage it may do to our client’s business.

We don’t reel you into our keep net.