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• 11 Nov

  Is Your Invoice Finance Company Overcharging?

  

  Is your invoice finance company overcharging?

  Invoice Finance Overcharging

  Generally speaking companies using invoice financing are very happy (98% would recommend their provider, according to our poll). However, it does happen that clients become very unhappy as they believe they have been overcharged by an invoice finance company.

  How You Can Be Overcharged

  There are a few different aspects to how you can be overcharged:

  1. Fees charged that are more than those that were quoted.
     
     
  2. Costs that were not explained in advance.
     
     
  3. Pricing that does not compare well with other providers.

  Whatever the situation, the first step is to understand invoice finance pricing and how it works. That link will take you to an article that sets out exactly how it is structured. Then speak to your provider about your issue. If that doesn't work there are other options below.

  To summary pricing, there is normally a service charge, discount charge and other charges. These should be specified in your agreement, however the "other charges" may be quoted in a separate tariff. It is worth asking for any tariff of charges so that you are prepared for the other costs that may be levied on your facility.

  Fees Charged Exceed Those Quoted

  This is very rare, but we have come across examples in the past. In many cases it may be a simple error rather than something sinister, occasionally incorrect fees are entered into a client's setup, on an invoice finance system. There are some aspects of pricing e.g. calculating the discount charge, that can be quite complicated. Therefore, it may take some effort to check that you are being charged correctly. We can help you investigate this if required.

  Costs That Were Not Explained

  Again this is rare but has occurred. We have had prospects that did not understand (or were not told?) exactly how the charges would work, and this can be a cause of diagreement with the funder. There is a clear requirement for charges to be explained up front.

  If your funder is a member of UK Finance they will also be bound by the Invoice Finance and Asset Based Lending (IFABL) Standards Framework will also apply, which demands that all clients are treated fairly. The current version of the framework also requires that standard charges are made clear to prospective clients and that they are made aware of any possible additional charges. There is an UK Finance complaints procedure if you cannot resolve your issue with a UK Finance member.

  Pricing That Does Not Compare Well With Other Providers

  This is very common as all invoice finance companies take a different approach to pricing, on average we have been able to save clients 31% of the fees quoted elsewhere. Our pricing research has shown that in some cases the charges can double between providers. The best approach is to check your fees against the market on a regular basis, perhaps annually to ensure that you are not being overcharged.

  By Glenn Blackman