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• 27 Jun

  How To Terminate An Invoice Finance Facility

  Termination of an invoice finance facility can happen for a number of reasons, driven by either the facility provider or the client.

  SEEK ALTERNATIVE QUOTES

  Firstly we should say that this information is not a substitute for seeking guidance legal advice from a solicitor regarding your arrangements - you should seek independent legal advice.

  Termination By An Invoice Finance Company

  Your invoice finance company will have the right to terminate the factoring or invoice discounting arrangement. Normally, there will be a period of notice that is required to be given in order to achieve termination, however, they may have rights (built into the contract) which allow them to terminate immediately in certain circumstances. For instance, if you were to breach certain conditions of the facility, as set out in your agreement. These are often referred to as "breaches".

  See our Guide To Invoice Finance Termination.

  If your invoice finance company has given you notice of termination, you could seek an alternative provider, or you could choose to switch to some alternative form of finance, such as a business loan.

  Bear in mind that if your facility is terminated by your provider, you may find it difficult to find a replacement facility. This will depend upon the exact circumstances of their giving notice. For example, if you have breached the conditions of your facility, you are likely to encounter issues finding alternative lenders to support you. However, not all invoice finance companies take the same approach, so there may still be options, depending on the exact circumstances.

  Funders are very reluctant to lose clients, so terminating a client's arrangement is always the very last resort.

  Giving Notice Of Termination To Your Invoice Finance Company

  Notice of termination can also be served by the customer on the provider. Once again, the terms of the notice that are required are usually set out in the agreement that governs the facility.

  Typically, you may be required to give say three months notice of termination, providing you have exceeded any minimum period of the contract term (often a year). However, the terms may vary widely. With a selective facility you may not need to give any notice of termination, you just stop sending in any more invoices for funding.

  On giving notice, you may choose to move to an alternative provider. Customers often find that they make such a move in order to improve on one of the following:

  1. The rates (charges and fees).
  2. The level of funding provided (prepayments).
  3. The security provided e.g. some providers may not require the same security as others e.g. supporting charges on property.
  4. The service received - different providers offer differing service levels.
  5. The type of product being offered.

  In such circumstances, we have put together a guide to moving between invoice finance companies that you might find helpful.

  Further Useful Resources Regarding Terminating

  If you are seeking to leave invoice finance completely, you may be interested to read our articles explaining the steps you could take to leave factoring.

  We have also put together an article explaining how you can calculate any termination fees.

  Read more about when you can terminate your facility and details of how you may be able to leave the arrangement before the end of your period of notice of termination.

  By Glenn Blackman