Invoice Finance Minimum Base Rates

As an Invoice Finance User, Are You Really Benefiting from the Record Low Bank Base Rate? Or Are You Tied in to a Minimum Base Rate?

We are seeing a lot of businesses in existing agreements where there is a minimum base rate within the agreement. We have seen these as high as 8%. When you compare that to the bank base rate of 0.25% some businesses are paying a real and unnecessary premium.

Only yesterday we saw terms issued by Close Brothers Invoice Finance that stated the cost of funds were 1.50%. In the world of invoice finance that seemed very cheap. The old adage says, “If it is too good to be true, it probably isn’t”, and sadly this was the case. The small print, and it really was small print, went on to say,

“This is the fee we charge, for the funding we advance to you. It is charged above GBP 3 month LIBOR or 2.50% – whichever is greater”

Suddenly, what appeared to be a great deal, seems somewhat misleading as they are actually quoting a premium as at the time of writing 3 month LIBOR is just over 1%.

You can see that the headline rate of 1.50% has suddenly become 4%.

Many businesses have signed up for agreements with minimum base rates and were either unaware, not concerned at the time of higher base rates or have forgotten.

Check your invoice discounting agreements and quotes and make sure you are getting the best deal you can.

The team at Funding Solutions would be happy to help.