Banks and other small business lenders are facing “a legal time bomb” over alleged abuses of the administration process, experts have warned.

Lawyers are beginning to examine controversial fees that asset based lenders charge when their clients go into administration, which could leave finance providers vulnerable to multi-million pound compensation claims. A Telegraph investigation has revealed that these lenders, which advance about £16bn to small businesses, are in some cases inappropriately profiting from administrations through so called “termination fees”, leaving creditors, including the taxman, nursing significant losses. While termination fees are meant to cover an unexpected breach of contract, some finance firms have been accused of actively seeking companies that are likely to fail in order to exploit their demise by classing it as a 'termination’ event. The asset based finance industry is unregulated and made up of banks and independent providers, which typically advance cash secured against debtor books. They advance vital funds to thousands of fast growing companies.....Read more here: Asset based lenders face legal action over fees - Telegraph