There’s lots of talk at the moment of regulation within the invoice finance industry. Whichever way invoice finance is delivered, through a disclosed factoring facility or confidential invoice discounting the level of funding brought to a business can be really beneficial and with the facility size mirroring sales they are the most suited working capital facilities. Bad publicity is meaning these really valuable tools are not being used by as many businesses as possible.
In recent years there has been a growth in the number of providers, bringing healthy levels of competition and a corresponding increase in the number of businesses offering support services, from software, recruitment and legal to the broking community and insolvency world.
Since the economic slump low interest rates and competition have squeezed margins so funders have sought ways of maintaining returns, hence the greater use of termination fees, breach fees, renewal fees etc etc, which are understandably in many cases causing concern. All those in the industry will have seen or heard of examples where it would be very hard to justify apparent excesses.
The support services can compound the problem and whilst an Insolvency Practitioners (IP) role is an important one the relationships that exist between funders and some IP’s adds fuel to the fire. Even if the motivation is correct, to an outsider it can appear very troubling.
Regulation is no panacea and there will always be rogues but at the moment the industry is very much not helping itself and the organisation that notionally provides governance is clearly worthless. Regulation needs careful consideration, with input from all interested parties.