Following a recent blog refinancing contractual invoices please find below some summary pointers re factoring and invoice discounting of contractual debt.

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Ok so we have established over the last few blogs that as the UK emerges out of the recession that using banks for working capital funding and in particular bank overdrafts is probably not the best form of finance. However there are so many invoice financing companies available how do you know which one will suit your particular business and who will give you the best deal. There are many factors that should be taken into consideration when choosing a provider. First there is a big difference between invoice discounting companies and factoring companies. The finance companies that are good at factoring are not always good at invoice discounting and visa versa.

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Hopefully now that we are out of the recession we will once again start to see businesses grow and to flourish. The benefits of invoice factoring during a period of growth are obvious however many businesses will be tempted to go down the overdraft route which in the long term may restrict a businesses cash flow and ability to operate from a liquidity point of view. It is also important that we choose the right factoring or invoice discounting company because not all of them are the same and they don’t offer the same level of funding and flexibility.

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News on the high street today is that we are finally out of the recession. This is great news however don’t expect the banks to suddenly ease up on their underwriting criteria. We believe that it will be many months possibly years before the banks get back to where we were before all this kicked off.

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One of the biggest issues facing small businesses in the current financial climate isthe lack of funding against certain customers. It is all well and good obtaining a factoring facility with a headline 95% prepayment if the finance company restricts funding against certain customers. Unfortunately many businesses will place that invoice finance with a factoring company promising the earth however if you are not careful you will end up with a finance company that potentially will not deliver.

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There are two ways of obtaining business  finance for MBOs. Firstly banks can do cash flow lends or an asset based lender can finance the assets within the business to provide the cash. The problem with banks is that during the recession they have had their fingers burnt with cash flow lends. Significant amounts of money are lent against the future profitability of the business. There can be potentially little security for the banks and  it easy to see why the banks have been writing off significant amounts of bad debt. During 2009 banks were doing hardly any cash flow lends however during 2010 we can expect this to increase as the economic recovery start to take effect and the banks relax their cautious underwriting approach.

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Arranging lease finance or asset finance is still increasingly difficult to obtain. The market for prime lending has changed considerably over the last eighteen months as the high street lenders are still taking a precautionary approach to lending. Before the credit crunch and the recession most of the high street banks had an asset finance division in addition to the core commercial banking. As the banks started to suffer losses and the availability of cash to the bank themselves began to dry up these asset finance divisions started to wind down these operations.

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Any business which operates in the construction industry or any business which invoices stage payments as part of a contract knows how difficult it is to obtain funding . Some banks maybe prepared to offer some form of overdraft however as soon as you mention contracts to most factoring and invoice discounting companies they will run a mile. The good news is that there two finance companies providing invoice finance against applications in the construction or any industry involved in stage payments. Depending on your own particular circumstances XL business finance will help you find the most appropriate invoice finance company.

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There are so many invoice finance products and companies to choose from. A quick search on the internet will reveal hundreds of finance companies all offering similar products and services. Although invoice finance is mainly about getting cash against unpaid invoices there can be a big difference between the many different companies and how they deliver their product. To make sure you get the best factoring or invoice discounting facility for your business it is advisable that you speak with a specialist independent factoring and invoice discounting broker. A good one will know the market better than any accountant and going to your bank for financial advise will be like going to your butcher for open heart surgery.

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Invoice factoring is still rone of the most buoyant forms of finance available in the UK today. There are still plenty of finance companies offering various forms of invoice finance. Unlike the asset financing and leasing market which seems to have dried up somewhat the choice and availability in the invoice factoring market appears to be plentiful with plenty of options and choices. A quick search on the internet search engines will reveal numerous finance companies offering invoice factoring. There are just so many to choose from. How do you know which product is best for your business and how do you know which invoice factoring company will be best suited ti delivering the right sort of service to your business. In short a good independent factoring broker will be well placed to advise you of the may products and services available. XL Business Finance provides a free factoring and invoice discounting service which ensures  the most suitable finance companies are recommended to your business.

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