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• 30 Dec

  Invoice Finance Termination Guide

  Termination is the process by which either an invoice finance company or their client terminates the receivables finance facility that exists between them. The circumstances under which termination occurs can vary and are explained in this guide to invoice finance termination.

  This invoice finance termination guide is intended to help companies that have been given notice of termination by their funder, or those that want to terminate their factoring or invoice discounting facility.

  Invoice Finance Termination Guide

  Termination of a receivables financing arrangement is normally governed by the terms of the contract/agreement that the parties have entered into. Usually, termination can either be:

  • Immediate - in the event of a breach of the terms of the agreement, where the agreement stipulates that no notice is required.
    
    
  • After a period of notice - in the event that either party wishes to leave the arrangement, a period of notice is served.

  Why Providers Give Notice To Terminate

  In the case of your provider giving you notice, this could be for a number of reasons including:

  • Risk issues - such that they no longer wish to finance your company. It may be that you no longer meet their risk criteria, or that they have changed their risk policy and criteria. It may be that you have breached the terms of the facility on one or more occasions. The list of risk-related reasons is very long but can include: changes to the nature of your trade; changes to your debtor book; a slowdown in debtor payments; a deterioration in your financial performance; a change in your personnel; entering into some form of insolvency arrangement or a breach to the terms of the facility e.g. banking customer payments into your own account, or raising invalid invoices.
    
    
  • Pricing & servicing issues - such that they feel that your account is no longer profitable to handle. This can include a change to the metrics of your business, or their internal procedures. In some cases, funders have withdrawn particular products and services that they no longer wish to offer. Notice to terminate may be given if there are administration problems associated with managing your account. In some cases, they may want to move you to an alternative service.

  Termination By Your Provider

  If your facility is terminated by your provider, you may need to quickly find an alternative funder. Not all funders take the same approach to risk, pricing and service delivery, so there may be alternative providers that will be prepared to finance your business.

  Terminating Your Facility Yourself

  Alternatively, the situation may be that you want to terminate your facility. Please see our guide: How To Terminate Your Invoice Finance Facility.

  • You want to move to another funder.
    
    
  • You want to move to an alternative source of finance e.g. self-finance or a business loan etc.

  In either case is likely that you will have to give a period of notice, so you should refer to your agreement and seek legal advice if required.

  We are able to help you find alternative sources of finance, please call Sean on 03330 113622 for support.

  By Glenn Blackman