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Archive for January, 2010

New start business and confidential invoice discounting

Tuesday, January 19th, 2010

It is now possible for certain new start businesses to offered full confidential invoice discounting. As we know confidential invoice discounting will release up to 85% of any unpaid invoices. As invoice finance can grow with the business it is much more preferable than any bank overdraft which tends to stay at a fixed level. In addition a bank overdraft is repayable at any time therefore invoice discounting provides a much safer option in terms of stability.

Traditionally confidential invoice discounting was for businesses with turnover in excess of £1.0m however before the credit crunch many different invoice discounting were offering confidential facilities for businesses who wouldn’t normally meet the standard criteria for such a facility. Along comes the credit crunch and all of a sudden it is like going back 10 years and all you can get is factoring. From the finance company point of view factoring is allot safer product because they are able to verify the debt by phoning your customers.  This can cause a problem for certain customers firstly because they don’t like the finance companies calling their customers ( not all of them are very subtle) and secondly you may already have an adequate credit control facility in place and as such factoring could become unnecessarily expensive.

However it has become apparent that a number of the the more independent invoice discounting companies are once again beginning o relax their criteria and as such it is again possible to obtain invoice discounting whereas last year you may have only been offered factoring. This is again the case with new start businesses. So long as the directors have had experience within that sector, adequate systems and procedures will be put in place invoice discounting with certain finance companies is definitely an option. XL Business Finance has been helping and advising customer for over 10 years in such matter.

Confidential Factoring or Confidential invoice discounting?

Monday, January 18th, 2010

The advantages of being able to release up to 90% of your unpaid invoices is obvious however many business are still put off invoice finance not because they think there is still a stigma surrounding the facility but because their customers will not allow it. Therefore a traditional factoring facility is unacceptable because the finance company will need to verify most of your invoices. A traditional invoice discounting facility is normally only available to long established and profitable businesses. Therefore a good chunk of businesses may find themselves caught between a rock and a hard stone. The good news help is hand and XL Business finance has access to a number of finance compasnies and creative finance products that could fill a few gaps in the market.

Many businesses will not be eligible for confidential invoice discounting because they haven’t been trading long enough, turnover isn’t big enough, they are not profitable enough,  they have gone through a prepacked administration or their existing factoring company has given them notice for breach of the facilities. From the finance companies point of few confidential invoice discounting is far more risky because it is not always possible to verify the debt and is therefore more open to fraudulent activity.

However one finance company XL business Finance deals with are prepared to give customers that don’t meet the normal criteria on invoice discounting providing a facility provided there a good systems in place. From a management point of view invoice discounting is less time consuming and potentially more profitable. For the first six months or so they may run a shadow ledger to make sure the facility is being run properly.

Confidential factoring provided by a different finance company is a half way house. You will be given your own dedicated credit controller who operates in the name of your business to ensure all the invoices are collected in the normal way. You will also be your own telephone number providing all the advantages of a full factoring facility with the confidentiality certain businesses require.

 

 

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Business Financing for a new start business

Sunday, January 17th, 2010

There are so many business financing options available for a new start business.  Nearly all the banks can offer a plethora of funding options however which ones are best suited for a new start business.

At XL Business Finance we have been helping many new start businesses for over 10 years and our experience and expertise ensure that a business is provided with the very best business finance options.

Understandably many new starts are drawn to their banks whom can potentially offer  equipment and asset finance, commercial mortgages, overdrafts as well as  factoring and invoice discounting facilities.

It is tempting to go with the bank who are offering a packaged deal however in doing so you might be storing up future difficulties when it comes to obtaining further credit in the future. Banks are very good at giving it to you with one hand and then taking it away with another. For example, we have seen many instances whereby the bank will offer a small overdraft facility in order to win the factoring business. All that happens is that the customer ends up with reduced limits on the factoring facility to counterbalance the overdraft.

In addition we have seen these initial overdrafts being completely withdrawn after a relatively short period of time. The business would have had far better cash flow if they had gone with a more flexible factoring company .

It may also be that a bank will offer you finance to purchase some assets or equipment. They mat take additional security to provide the funding. These deals may seem very attractive in terms of the interest costs however these assets may just as well be financed via a third party leasing company. A little further down the line you find yourself asking the bank for some fundeing  for something which can’t be leased but the bank are fully exposed.

We would recommend that if  third party finance is available at the start then this should be seriously considered so you don’t have all your eggs in one basket.

Leasing Printing Machinery

Saturday, January 16th, 2010

As we know printing equipment can be categorised into two types. Digital high tech equipment and traditional equipment such as litho presses. There are a number of specialist print finance companies currently lending money and you wold think it would be easy obtaining finance as they know the market. However it is not as simple as that because different finance companies have differing views of  the suitability of  digital and non digital as security for a finance lease oir a hire purchase agreement. XL Business Finance has an area of expertise in the print sector and has been helping many printing businesses arrange finance for over ten years.

For example it is unlikely you will get a print finance specialist to finance an expensive  digital printer. A print finance company is more interested in the residual value of the equipment and their exit route if they  such a machine came back to them in a distress situation. Print finance companies know the litho market and a certain degree the flexo market very well and as such tend to stick to financing these sorts of machines.

It is therefore more likely you will get finance for a digital piece of kit or a non ltho piece of kit from a traditional balance sheet finance company. So long as we can evidence serviceability, there is no adverse information and your business is profitable than you have a good chance of geting finance approved.

The problem is when a business that has been struggling wishes to buy digital kit which is perceived as having very little security. There isn’t enough value in the kit to get the print finance companies interested and the balance sheet isn strong enough to justify an advance from a high street bank owned finance company. Potentially the only way is to provide additional security by taking a charge over existing kit or even property.

invoice finance or overdraft

Friday, January 15th, 2010

Without a doubt we would recommend invoice finance over a bank overdraft any day of the week. There are obviously exceptions of course. Invoice finance provides 80% of your unpaid invoices as soon as you have raised your invoice. It provides a flexible approach to your working capital requirements. Obviously this wont work if you are getting cash on delivery or on the point of sale. Uner these circumstances you would need an overdraft facility to provide you with adequate working capital.

There are many advantages to invoice finance compared with a bank overdraft. Overdrafts are normally secured aginst property and are fixed at a set amount with little scope for increasing as your business grows. More importantly it should be noted that a bank overdraft is repayable on demand. If your business takes a turn for the worse potentially the overdraft can be withdrawn without notice. Unfortunately in the current economic climate we have seen happen all too often. This will never happen with an invoice finance facility.

Invoice finance can be provided by way of a number of products. Factoring in addition to providing cash against unpaid invoices provides a credit control facility. Invoice discounting can be provided on a confidential basis and as such only provides a working capital facility. Invoice discounting is suitable for more established businesses who will have their own credit control facilities in place. Different finance companies provide slight variations on these two products but in main these are the two most common invoice finance products.

A quick search on google will reveal hundreds of potential finance companies. Banks are good at invoice discounting however there are independent companies that are capable of providing an equally acceptance product. As a rule of thumb independents are better at providing factoring products. XL Business Finance can help you find the most appropriate finance company.

Is it Possible to get overpayments with invoice factoring

Thursday, January 14th, 2010

Invoice factoring provides cash against unpaid invoices. Most finance companies will pay up to 80% of unpaid invoices and give you credit of up to 90 days. Before the credit crunch it may have been possible to obtain up to 90% of your  sales ledger however this is very uncommon in the the era of  very cautionary finance companies. When choosing an invoice factoring company it is important to take into consideration how flexible they may or may not be.

 Imagine coming to the month end and there are not quite enough invoices in the pipeline to draw down enough cash to pay the wages. However you have a few big  jobs around the corner and you know you will catch up the following week. If you are with a bank based factoring or invoice discounting company and you need a bit of extra cash then good luck trying to find a decision maker. If you have chosen a smaller and sometimes independent factoring company you will have a much greater chance of getting an overpayment. At XL Business Finance we do have clients who have moved to bank based factoring companies and have moved back to smaller independent for this very reason. They know at the end of the month that if here are going to be any short term cash flow problems they need a flexible finance company that they know that after one phone call and no more than 24 hours later they have some extra cash.

An independent factoring company is one that is not bank owned and therefore does not have the same red tape and bureaucratic hierarchy to go through to get decision done. They have usually been set up by quality guys that have been within the factoring and invoice discounting industry for many years. The MD will sit in the same office as all the other staff so special requests and help can be obtained by walking straight into his or her office.

Factoring a new start business

Wednesday, January 13th, 2010

Arranging factoring finance for a new start business should be relatively straight forward however not all factoring companies are the same so it is imperative that if you are starting a new business that you choose the correct type of finance company for your specific requirements. A well run factoring service will release up to 80% of your unpaid invoices and provide you with much needed working capital.  

The most important aspect of a new start business is to get a proper level of funding and that the finance company collect your debt as quickly as possible. It is important that you are never more than one or two phone calls away from a decision maker. XL Business Finance has been helping clients choose the most appropriate invoice factoring company for many years and as such we have added value to many new start businesses.

As a rule we would not recommend a bank for factoring although there are instances when we would. One bank in particular is quite good at financing  contractual debt and another is quite good at financing foreign debt. Typically an independent based factoring company provide a much better service than a bank based factoring company. Most independent s will telephone all your customers whereas a bank might only phone the top 3 customers

It is also worth finding out where your account will be run from as there is no point in dealing with a factoring company at the other end of the country when there could be an excellent finance company located within a few miles. We will take into consideration other factors when helping you choose the most appropriate finance company.

The quality of your sales ledger, the number and concentration levels will all help to make a recommendation. It will not take long to do an assessment of your business and we will give you a few funders to have a look at . This service is free!

Can I refinance Plant and machiery

Tuesday, January 12th, 2010

The good news is thatachinery it is possible to refinance plant and machinery. The even better news is that it is possible to refinance plant and machinery just about for any purpose. There are still many asset based lenders proactively growing their books in the current financial market. This is a stark contrast to the bank owned balance sheet finance companies that seem to still tucked up in their shells. XL Business Finance has been at the forefront of asset based lending for over 10 years and we are one of the UK’s leading experts when it comes to the refinance of plant and machinery.

Refinancing of plant and machinery is a very very specialist market and as a rule non of the high street lenders operate in this market.  An asset lender will advance an amount against the value of the plant and machinery and depending upon which finance company you go to there might be a large valuation in their perceived valuations. As an independent finance company ,  XL Business Finance we know exactly which finance companies are best at financing what sort of asset. For example some finance companies are good at financing printing equipment and their are others that are experts in financing haulage equipment. It is important to get a broker which knows this market well as it will save you a great deal of time and effort going around the houses.

Any offer of finance will be based on a percentage of the trade value or forced sale value (FSV). A typical deal may be based on a eightypercent advance. Unfortunately there is a big difference between trade and retail values in the current climate.  An asset based lender can only advance aginst a worse case scenario and good equipment is being sold very cheaply in forced sale situations at auction. This is obviously affecting valuations when it comes to refinancing plant and machinery.

I want invoice discounting but I have only been offered factoring!

Sunday, January 10th, 2010

We are seeing many businesses being forced by their banks  to use factoring as opposed to more risky invoice  discounting. This is usually following some adverse trading conditions where the bank wish to keep a tighter grip on the business. The good news is that there are still one or two independent based finance companies that would rather fund via confidential invoice discounting rather than factoring.

Although factoring and invoice discounting are both forms of invoice finance it is traditionally harder to obtain invoice discounting as opposed to factoring. From the point of view of any finance company invoice discounting is a far riskier finance product. Usually invoice discounting is provided on a confidential basis. Many customers prefer the confidentiality that invoice discounting provides as there is still in some circles a stigma against using such products. However the confidentiality of invoice discounting does bring its risks from the finance companies point of view. As the customer you will send copy invoices to the finance company against which approx 85 % of the value of the unpaid invoice is paid upfront. As such invoice discounting is more open to abuse and as such a business must normally have been trading for a number of years, have a strong balance sheet and be profitable before a bank will consider them for invoice discounting.

With factoring the fiannce company maintains afar greater degree of control as the financec ompany will verify the sales ledger on a regular basis and will have more hand on approach to running the facility. Therefor phoenix businesses, loss making businesses and new start businesses may be eligible for factoring but not invoice discounting.

However one finance company we do business with would rather do invoice discounting as opposed to factoring. For the first few months of the contract they will keep a close eye on it and run a shadow ledger and if everything goes well ther business will have a fully operational invoice  discounting facility.

Business Finance from asset based lenders

Saturday, January 9th, 2010

Business Finance covers a great number  of financial products many of which can be provided by independent finance companies as opposed to bank based lending. We would suggest that organising business finance has a great deal of benefits when using independentbased lenders. In the current economic climate it is advisable to spread as many types of lending with as many different lenders as possible. Never has it been more prudent not to have all your eggs in one basket. Fundng from asset based lenders is still relatively abundant therefore in theory it should be easier to be less reliant of the banks.

At XL Business Finance we would recommended that if possible you should only use your bank as a clearing facility. An invoice discounting or factoring facility is preferable to a bank overdraft. Invoice finance grows with the business  whereas a overdraft which is repayable on demand will often be fixed at a set amount which depends on the level of security available. An overdraft amount is nearly always never enough.

Also there is absolutely no reason why you should need to have a commercial mortgage with your own bank. There are a number of specialist commercial mortgage institutions offering excellent deals. keep your commercial mortgage separate from your own bank to prevent the bank having too much control, on your businesses finances.

Equipment finance by way of hire purchase and leasing can easily be arranged via third party leasing companies. Again using a different finance company will prevent having too many eggs in one basket.

XL Business Finance has been helping many businesses for over 10 years to obtain the most flexible and competitive funding available in the market place. We understand how to structure a proposal and what information the finance companies require resulting in a very high conversion of our applications.