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Archive for November, 2009

Maximise your cashflow with invoice factoring

Friday, November 20th, 2009

Once upon a time invoice factoring was condsidered the lend of last resort. There was once a stigma surrounding factoring or invoice discounting however businesses wishing to maximise their cash flow realise that there are no better options.  Any sensible finance director or managing director will know that a bank overdraft is potentially a very dangerous funding option. All overdrafts are repayable on demand and we have seen many instances recently where once very profitable businesses have had their overdrafts withdrawn because of a poor set of trading results. This can have catastrophic consequences for the business and can even have worse consequences for the directors particularly if personal assets have been lodged as security.

Factoring or invoice discounting both maximise a businesses cash flow by releasing cash against invoices you have raised but as yet have not been paid for. The security is the actual invoice and the factoring or invoice discounting company are expert in making sure that the invoices are paid in a timely and orderly fashion. Therefore any exposure as a result personal guarantees is reduced to a minimum.  Guarantees are not taken by all finance companies . It just depends on the circumstances of each particular deal.  This has got to better than using a bank overdraft!!!

Why use an Invoice financing broker

Thursday, November 19th, 2009

I read on a blog recently asking what a factoring or invoice financing finance broker does for his money. It was suggested that a broker should approach the most  number of finance companies possible and get the cheapest quote for their customer. I couldn’t disagree more. Any deal that gets touted around the market and effectively becomes a beauty parade of factoring companies can do a business more harm than good. The problem is that if a finance company is aware that they are up against three or more finance companies they don’t take the deal seriously. We have seen business recently that have seen six or seven finance companies.

At XL Business Finance we will talk to our customers and very quickly we can narrow the most appropriate finance company to two or maybe three. Different invoice  finance  companies all have different ares of expertise. WE understand the factoring and invoice discounting market and we understand which finance company will be best suited for your particular requirements. Some finance companies are good in construction which has allot of contractual debt. Other finance companies are good at international trade and some are better than others at credit control.  Also  there are a number of regionalized companies that a strong presence in certain geographical areas. Why would you use  an invoice finance company based in London if your business is based in Manchester or visa versa.

So when we have narrowed it down to the two or three most appropriate finance com[pany w will set up meetings on your behalf. We than say then it comes down to personal choice and you will more often choose  the company that you feel you can develop a rapport with the members of staff. In addition this costs you nothing. Our service is totally free. We do however take a introductory commission for the finance company.  All factoring and invoice discounting companies will pay commissions so rest assured our advice will be impartial and we wont send you a bill!!!

What do I do if my bank withdraws my factoring facility

Wednesday, November 18th, 2009

Although the high street banks all say that their doors are open for business in reality this couldn’t be further from the truth. What is happening at the moment is that the banks are looking at their portfolios very closely in deed. If a business steps out of line in terms of how they operate their factoring facility , they post a bad set of results the high street banks are proving to be very in flexible. In truth before the recession they were probably taking on too many customers than they should hve done. As a result service levels dropped and now that the economy has taken a turn for the worse they cannot manage their accounts as they should.

The result is that Banks  are looking for excuses to clean up their portfolios. At XL Business Finance we are seeing more and more businesses that have been given notice to change to a new factoring company. Although this will be a worry for many businesses the good news is that are plenty of finance companies that are actively looking for the customers that the high street banks do not wish to keep on their books. XL Business Finance has the experience and knowledge of the UK factoring market to help you find a new finance company.

We will make sure that your new company will provide you with the service and flexibility that your business will require. Any  independent factoring company will provide a much better service than any high street bank. Depending on your own particular circumstances and geographical location we will ensure that you get talking to the most appropriate finance company.

Invoice discounting or factoring ?

Tuesday, November 17th, 2009

Invoice discounting are two completely different funding products. Although most finance companies will offer both facilities not all finance companies are great at doing both. Altough both funding products will release cash against unpaid invoices and potentially give you the financial freedom to grow or develop or indeed just survive in the current economic climate. Factoring is traditionally provided with full credit control  whereas invoice discounting is provided on a confidential basis.

Factoring can be provided for businesses with turnover as little as £80,000. In order to be eligible for invoice discounting turnover will need to be at least £250k. Up until a few years ago unless your business had turnover of at least £1.0m then there would be absolutely no chance of obtaining an invoice discounting facility. However when different finance companies were vying for business in the good old days before the credit crunch this minimum turnover became lower and lower.

Invoice discounting is provided on a confidential basis which means your customers are unaware that the finance company is providing funding against yourinvoices. Therefore from the funders point of view the facility is more risky than factoring as potentially the facility is more open to abuse in terms of fraud and raising fictitious invoices. Therefore a business must be profitable ,long established  and have well established credit control procedures in order to qualify for invoice discounting.

Factoring is always provided on a disclosed basis and your customers will be aware that the finance company is providing funding against your invoices. More often than not the factoring company will provide a full credit control service. Therefore the finance company has a much greater grasp and control on your finances and as such they are happy to provide funding for new start businesses , businesses which are loss making and businesses which have a relatively small turnover.

How to choose an invoice finance company

Monday, November 16th, 2009

A question that at XL Business Finance we are asked most frequently. Imagine the financial freedom that an invoice finance  facility will provide. Up to 90% of unpaid invoices are released by way of a cash injection into your business as and when you raise your invoices. This is a great facility which grows with your business and there are many UK based finance companies offering to help. One search on google will reveal hundreds of factoring companies.  Some are bank owned, others are independent and most are still being aggressive in terms of doing deals. How do you know which finance company is best for your particular needs. At XL Business Finance we have 15 years experience of helping and advising our clients.

Invoice Finance is basically a generic term for the many different finance options available. Factoring , invoice discounting, confidential factoring and confidential invoice discounting are all basically forms of debtor finance.   Which finance company is best for you depends on which facility you require. New start businesses, businesses with a poor set of trading results or with a relatively small turnover will only be offered a  disclosed factoring facility whereby your customers will be aware that a finance company is financing your invoices.  XL Business finance would normally recommended one of the larger independents for a factoring facilty because normally they provide a better service than a bank based factoring company. However if your business is long established and profitable and the finance company will allow you to do your credit control then in certain circumstances a bank based invoice discounting company may be more appropriate. However beware if your business trading performance takes a urn for the worst then you will be wishing you have gone with a independent who tend to be more approachable and flexible.

Invoice Factoring For a Small Business

Sunday, November 15th, 2009

There are many forms of  products available and XL Business finance as an independent factoring company has been advising clients for many years. Whether you are looking to switch to another factoring company or you are considering using factoring for the first time XL Business Finance can provide free and impartial advice to you and your business.

Quite often we get asked to asses an existing facility and quite often we recommend that the client stays where they are. We are great believers that if it isn’t broken then don’t try to fix it. However we do believe that invoice  factoring for a small business is  very specialist market. What is the point of going to a high street bank if your turnover is only a couple of hundred thousand a year. You will be lost in a great big institution where you wont be able to speak with a decision maker and your business will be too small for anyone to care.

The good news however that there are a number of smaller independent factoring companies that specialising in serving the smaller end of the market. Their ethos is purely customer service driven and they are able to help you in a way that will seem like a breath of fresh air compared with the high street banks. These finance companies can be completely regionalized so to find out which one near you sis best for your business give us a call

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Why a business should use invoice financing

Saturday, November 14th, 2009

Invoice Financing can take place in many forms and variations however in a nut shell it gives a business the ability to release cash against unpaid invoice. Historically it was used as a lend of  last resort, however over the last few years the market has matured and the stigma of using a cash flow facility seems just about to have disappeared. In fact we can give you many reasons as to why invoice discounting or factoring  is far better than many traditional forms of bank finance.

Up until the last few years many businesses would use their overdraft to fund their working capital requirements. However as credit terms have been continually stretched many business have found it difficult to operate within agreed limits. Traditionally an overdraft facility has been set against the trading performance of the business and the amount obtainable will more often than not have been restricted by the ability of the business to provide tangible security in the form of bricks and mortar

Invoice financing is totally secured against the unpaid invoices which are assigned to the particular finance company.  Unless an overpayment is required no other security is required. The great advantage is that the facility will grow with the business. More importantly providing the business is trading within the terms of the agreement there is no risk of the facility being withdrawn. This is not the case with a traditional bank overdraft which is payable on demand. We have seen many instances recently whereby   the banks have withdrawn the facilities with absolutely no notice resulting in very difficult cash flow problems for the business. our advice is always go for a cash flow facility rather than the overdraft.

Which is the best invoice discounting company

Friday, November 13th, 2009

A question that we get asked most regularly. The simple answer is that it depends on the particular needs of each customer.    It also depends on the length of time the business has been trading , is it profitable and the quantity and quality of the ledger. If it is a very clean ledger ( or debtor book ) in that it is not difficult to collect payments then in theory there should be many finance companies to choose from.

However you must take into account other considerations. Certain finance companies are very good at servicing certain debt.  There is only one high street bank that is any good with foreign and international debt and there is only one bank based invoice discounting company that is any good at financing contractual debt. And guess what they are two completely different banks. Some banks are also good at offering built in credit insurance and others can be difficult when it comes to setting funding limits. Most banks and independent factoring company are fairly similar when it comes to pricing however the cheapest deal isn’t always the best.

A customer quoted to us recently that he wished he had chosen a high street invoice discounting company but rather that he he had had gone with a independent finnace company that traditionally could be more flexible and thus providing more cash against his invoices.

Lloyds bank restricting my invoice discounting facility

Thursday, November 12th, 2009

Hardly no surprises that any business currently using a factoring or invoice discounting facility with LLoyds bank may be having their credit lines severely restricted. XL Business Finance has seen three customers this week all wishing to move from LLoyds due to a restriction in cash availability. On Tuesday this week LLoyds bank announced the loss of 4500 jobs some of which will go in the collections department. We are unclear if itis from their cash flow arm LLoyds TSB Commercial Finance however the bank is obviously under pressure and as such we are starting to see businesses being affected by their noncommercial view.

Traditionally it can quite a long winded affair switching invoice discounting or factoring companies especially as many finnace companies will tie in their customers for a least a year and will require to provide 3 months notice if they wish to switch funder.  Sometimes it  my be possibel to buy one elf out of a deal with the support of a new finance company however even then it might be a  costly exercise. The good news is that many of LLoys customers have been signed up to a short one month notice contract and it is these customers that we are seeing take advantage of their ability to switch finance company. If in doubt we can check any documentation on your behalf and give you some advice from an independent view point.

Improve cashflow with Invoice Finance

Wednesday, November 11th, 2009

Invoice Finance is suitable for businesses that supply goods and service to other businesses and provide them with  with credit terms for payment. This form of cash flow finance will provide a business with up to 95% of their unpaid invoices immediately with the remainder payable to the business when your customer settles the invoice. Once upon a time Invoice Finance was deemed to be a finance product of last resort however it is fast becoming the number one choice finance product for managing a businesses cash flow.

There are various forms of funding  available however most  are a variation of the sane product. Invoice discounting , invoice finance and invoice factoring are  all basically the same products providing cash against unpaid invoices. Banks have traditionally offered  overdrafts as a working capital facility however they do not have the same flexibility and adaptability. Invoice Finance will grow with your business as the factoring companies have a close control and therefore a better understanding of the invoices you are raising. The facility grows as you grow your business.  An overdraft is traditionally agreed on the performance of the business and is often restricted by additional available security such as bricks and mortar. At some point most banks will try and force a business down the factoring or invoice discounting route however there are many independent alternatives possibly provide more funding and a much better service.

 
 
 

XL Business Finance Ltd is a privately owned and independent business financing company with established links to many of the UK's leading finance houses. XL Business Finance provides a viable alternative to high street banks that lack the flexibility and imagination to provide a solution to most business users requirements. XL Business Finance can provide a full range of business financing solutions and we ensure a high level of customer service and pride ourselves on quick decisions. Our independent status will ensure any offer of funding and asset finance leasing is best suited to our customer’s needs.

XL Business Finance, Eaton Place Business Centre, 114 Washway Road, Sale, Cheshire M33 7RF UK.

 

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