A national  financial scandal is about to erupt, this time involving the
practice of lending to companies based on their sales book.
Some banks and invoice factoring companies – the latter includes a venerable Liverpool
firm – are likely to be caught up in a multi billion pounds firestorm.
Campaigners are claiming that lenders are placing firms into administration or liquidation
too quickly in order to cash in on assets and levying hefty termination and collection fees.
It is further alleged that in many cases lenders and insolvency practitioners are working together to put people out of work and cash in on the resulting misery.
The biggest stumbling block to shining  a light on malpractices within the asset-based finance industry  is because it is not regulated.
Frances Coulson, former head of insolvency trade body R3, said: “There is an enormous
amount of abuse going on at the murkier end of the market.”
One industry insider said: “Some lenders are trigger happy in appointing administrators so they can gorge themselves on customers sales’ ledgers.”
A  Business Department spokesman said that the government is aware of the issues that have been raised and that BIS and the insolvency service would be investigating.
Brian Moore, who has launched the Regulation of the Asset-Based Finance Industry, told me:
“This is equal to or worse than the banking industry’s scandals so far and is going to open a massive can of worms. We are calling for regulation of this industry and the return of more than £5bn that has been creamed off which should have gone to HMRC if anyone.”
The 2002 Enterprise Act decreed that HMRC should no longer be the preferred creditor, a role
eagerly taken up by banks and invoice discounters There is also concern over the links between Ips and the industry, Brokers who pass leads to lenders are often owned by the IP.
A Liverpool factoring business increased its profits from £34m to £41m last year.
The company has been subject to a vicious blogging campaign but despite threatening legal redress has yet to take action to close the site.
Mr Moore added that not all companies in the sector were suspect and that many run very rigorous ships.


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