The Minimum Annual Fee

The implementation of the Minimum Annual Fee has increased dramatically in recent years to the extent that most factoring companies now insist on a Minimum Annual Fee for all of their facilities but this can hide a couple of potential problems :-

Firstly, some factors are not particularly selective when taking on new clients and will take on the most inappropriate cases.

Frequently the additional burden of factoring costs will ensure that these companies do not survive long and when they cease trading (even after a month) the factoring company  becomes entitled to the balance of the Minimum Annual Fee.

Secondly, the craftier factors will insist on an Agreement that cannot be terminated for twelve months, with three months notice thereafter.

What the client tends not to realise at the time is that the day after the anniversary date, the factoring company is entitled to another year's Minimum Annual Fee which means an effective lock in for two years or paying a penalty.

Please see next page for details on why clients try to terminate the factoring facility