What does the current low Bank of England base rate mean to invoice finance users?

Well you may think that everyone is benefiting from the current low rates. Unfortunately this is simply not the case.

If you have had a facility in place for some time it will be worth checking the small print and understanding if you have a minimum base rate in place. I know one lender who wrote to all clients advising that the minimum base rate was 5%. At the time the Bank of England base rate was 5% so nobody worried about it. However, I do wonder if they now realise that they are paying 4.5% over the Bank of England base rate plus the discounting margin added on by the lender. This is not isolated to an individual lender and is fairly common practice.

New clients may feel that they will benefit from the low base rates. Undoubtedly they will but again minimum base rates are prevalent in many agreements. A large independent has a minimum base rate of 3.5%. In fairness their own cost of funds will be higher than the Bank of England base rate so it is not all profit but it is important to be aware of what you are actually paying.

Our advice is to review any facility you have had in place for some time. When looking at alternative quotes for a new facility be sure to understand all the costs. Headline rates can be misleading!

Remember to check the minimum base rate!

This entry was posted in Uncategorised. Bookmark the permalink.

One Response to What does the current low Bank of England base rate mean to invoice finance users?

  1. Zachery says:

    Lovely contribution, trendy page template, maintain the good work