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Joshua
Joshua, Lawyer
Category: Law
Satisfied Customers: 31701
Experience:  LL.B (Hons), Higher Prof. Dip. Law & Practice
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I would like advice in the legality of invoice factoring, in

Customer Question

I would like advice in the legality of invoice factoring
JA: Where are you? It matters because laws vary by location.
Customer: in England
JA: What steps have you taken so far?
Customer: I have been approached my an individual claiming to run an invoice factoring business and offering me the opportunity to invest in the business for a monthly % interest fee depending on the amount I put in
JA: Is there anything else the Lawyer should know before I connect you? Rest assured that they'll be able to help you.
Customer: no
Submitted: 15 days ago.
Category: Law
Expert:  Joshua replied 15 days ago.

Hello and thank you for your question. My name is ***** ***** I will be very pleased to assist you. I'm a practising lawyer in England with over 15 years’ experience. Please be aware that although I will endeavour to reply to you promptly, I am also in full time private practice and so I may not be available to respond immediately and it may also take me a few minutes to prepare a reply. The site will notify you as soon as I respond. I look forward to working with you to answer your question fully.

Expert:  Joshua replied 15 days ago.

May I confirm if the individual or business is licensed by the financial conduct authority please?

Customer: replied 15 days ago.
Hi Joshua, thank you for your response. It is a business, the individual who approached me is the Director. The business does not appear to be registered with the FCA. On querying this they advised that as the investment will be a B2B transaction then there is no need to FCA regulation. I would only be able to invest money in if I have a registered limited company.
Expert:  Joshua replied 15 days ago.

the investment may not need to be authorised but the factoring work would typically need authorisation. I suppose my query would be how they are carrying out a factoring business without authority from the financial conduct authority. Have you raised this query with them to date?

Customer: replied 15 days ago.
My understanding is that they advertise their factoring services to small businesses who need funds to continue running operations while awaiting the payment of an outstanding invoice. The small company would borrow money from the factoring company for the value of their outstanding invoices. The “factoring company” then seeks out investors with limited companies such as myself to lend money to the small business. In return I would receive an interest payment monthly for x number of months. At the end of the contract (typically 6 months) I would receive back my initial investment plus the final interest payment.
Customer: replied 15 days ago.
Essentially it looks like the “factoring company” is acting as a broker between the borrower and the lender
Expert:  Joshua replied 15 days ago.

thank you. This type of business would not appear to require an FCA licence. the business may choose to be a member and regulated by UK Finance which is a form of self regulated trade body but it is not a legal requirement:

https://www.ukfinance.org.uk/

in terms of your investment, the main issue for you is one of risk in terms of your investment. Accordingly, you may wish to consider what security if any the businesses offering in respect of your investment. If it is simply being invested with the company with no security, then the investment would be a very risky investment as it would be entirely dependent upon the success of the business and in particular, the business continuing to trade.

You may wish to consider whether a personal guarantee from one or more of the directors would be appropriate and whether any security against any specific assets or property would be appropriate to request

Expert:  Joshua replied 15 days ago.

according to the councils website, a dispute can be raised using the following link:

https://myforms.luton.gov.uk/service/Make_a_complaint__comment_or_compliment?noLoginPrompt=1

Customer: replied 15 days ago.
Thank you so much. This has been very helpful
Expert:  Joshua replied 15 days ago.

I'm glad the above answers all your questions for now. My apologies for the last post above which was posted to the wrong thread and please disregard this. If you have any follow up questions please revert to me.

Customer: replied 15 days ago.
One more question, in the event that an investment is made and there is a breach of contact what recourse is available to the lender? Is the lender able to claim back money from the “factoring company”. For context the draft contract I have seen is between the “factoring company and the “lender” specifying that the lender is lending money to the borrower for a period of x months. The lender will be paid x% intrest for the the duration of the contact. At the end of the contact the lender will receive back the initial investment.
So if the contract is breached in anyway is the borrower able pursue a civil claim against the “factoring company”
Expert:  Joshua replied 15 days ago.

this will depend upon the terms of the investment agreement. It is possible that it could either be between the factoring company and you or between a third party and you.

If the factoring company is specified as the borrower then presumably the agreement is as between you and the factoring company but I would not be able to say this with any certainty without sight of the document

Expert:  Joshua replied 14 days ago.

I hope the above is of some assistance but if you have any further questions, please revert to me.

Expert:  Joshua replied 13 days ago.
I trust the above was of assistance and that you do not have any follow up questions for now. If there is anything else I can help with please reply back to me though.

Expert:  Joshua replied 13 days ago.

I hope I was able to answer your question. If you would like to ask me another question in the future, you can add me as a favourite Expert. You'll have the option to do that on your "My Questions" page if you choose to rate our interaction or you can request me by name if you wish. Thank you again for visiting JustAnswer and see you again in the future I hope.