Obtaining business finance for a new start business is most difficult at the best of times. In the current economic climate it is even more difficult especially if you approach your local high street bank for funding. Anyone who has had the pleasure will realise  that many banks promise the earth and after providing expensive business plans, cash flow projections and numerous meetings deliver very little. And more likely than not if they can do something they will want to take a charge over property and the wife and kids. The good news however is that XL Business Finance has been helping many new start businesses obtain various forms of finance.

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Many businesses contact us assuming obtaining leasing facilities for new equipment will be a) easier to obtain and b) cheaper than a traditional hire purchase facility. The answer is monthly repayments and ease of obtaining credit is exactly the same. The only difference being slightly different tax treatment. Which finance facility is best for your business depends on your own requirements and preferences.

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If your business is planning to invest in capital assets (ie plant and machinery) and/or new staff for expansion, rationalisation or diversification then your business could be eligible for a grant. If the project is yet to start and the your business serves or plans to serve more than a local market than European Grant monies may be available. XL Business Finance has teamed up with a specialist firm of chartered accountants to provide a free assessment of your eligibility for a grant. The initial assessment is absolutely free and a fee is only payable on the successful draw down of a grant.  No grant no fee!

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At a time when it is becoming more and more difficult to obtain working capital through traditional banking facilities many businesses are looking to alternative and possibly more flexible form of finance. Invoice finance combined with stocking finance is an asset based finance product that can provide additional working capital over and above traditional invoice discounting and factoring facilities.

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Amongst all the turmoil of the last eighteen months we are still seeing one or two opportunities to fund management buyouts.  This makes a change from the business going bust and new directors and shareholders  buying  the business off the administrator. In terms of providing funding there are fewer options than there were before the credit crunch however asset finance is becoming more and more prominent as a option to top up other types of funding.

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Contrary to popular belief switching factoring or invoice discounting companies is relatively straight forward.  However it is more difficult if the exiting funder doesn’t want want you to leave.  Under extreme circumstances the existing discounting company will have notice periods built into the terms of the deal which  they will require paying in full. As notice periods could be anything from a  month to six months a chunk of minimum payments can soon add up. However if the relationship has totally broken down the existing provider may be willing t0 reduce their fees and the new provider may be willing to contribute to the fees to ease the pain so to speak. In addition a minimum contract from one to three years is not unusual and this must also be taken into consideration.

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Ok, I know I keep harping on about the banks and potentially having too many eggs in one basket however we have recently come across a situation which shows the banks for what they truly are.

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One of the most common difficulties currently facing many businesses is that creditors are trying to shorten their credit terms. In extreme circumstances we are seeing many credit terms being completely removed. Suppliers are wary of providing credit on the basis that they probably have had their fingers burnt due to the vast number of businesses going into administration. This doesn’t help the business which are left particularly when it appears they themselves are struggling to get cash out of their own customers. Banks are being very difficult when it comes to increasing overdraft limits  therefore in order to obtain sufficient working capital many business are turning to more flexible forms of invoice finance. Additional working capital is also being obtained by refinancing existing capital equipment.

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Many business believe that they are not eligible for an invoice finance product because they have a poor trading history. This will almost certainly be the case if you require an invoice discounting facility. This might also be true if you approach a high street bank for either invoice discounting or factoring. The good news  is that even if your bank has knocked you back for a factoring facility there are many independent factoring companies specialising in this area and they are able to take a more flexible approach to helping a business.

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Invoice financing provides cash against your unpaid invoices. Most factoring and invoice discounting companies will release up to 95% of your newly created invoices immediately with the remaining 15% being paid when your customer settles the invoice in full. For small businesses that might find it difficult to obtain a bank overdraft invoice financing can provide much needed working capital. As mentioned in previous blogs not all finance providers are the same and this is even more relevant when it comes to a small business choosing the right invoice financing company for their business. XL Business Finance has been helping small businesses for over 10 years obtain the most appropriate and flexible financing solutions.

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