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Archive for February, 2010

How debt factoring works

Thursday, February 11th, 2010

Debt factoring provides an alternative to a bank overdraft for cash flow purposes. Up to 85 % of outstanding debtors are releases as you raise an invoice. An overdraft will be restricted in size depending on the amount of aavailable security aavailable. A factoring facility will grow with the business and will provide a available source of working capital as a business grows. In addition a certain amount of credit control is provided in the process. A minimum charge for running a factoring facility is circa £2-300 per month. For a small business this may seem allot but compared with the cost of employing a credit controller we think it provides pretty good value for money. The minimum turnover to make it cost effective would be in the region of £80k per annum.

There are two charges for a debt factoring charge. First the interest rate for borrowing money is comparable to a bank overdraft. You will be charged at 2% over base or libor depending on the finance company. Beware some finance companies charge a minimum base rate and as such it is prudent to check the small print to ensure you are comparing apples with apples. The second charge is the service fee for providing credit control and debt collection. Although a bank based factoring company may offer a very cheap service charge they do not always provide the best service. Certain banks will only chase by telephone your top 3 customers leaving the rest to be chased by letter. Therefore debt turn is not always the best. A specialist factoring company will telephone all your customers and as a result get the money in through the door quicker. This aspect of the factoring service is very much about adding value to your business and as such the cheapest is not always the best.

Obtaining Finance for equipment

Thursday, February 11th, 2010

iceXL Business Finance has over 10 years of helping businesses obtaining finance for equipment by way of finance lease or hire purchase facilities. Never has it been more difficult to obtain funding. Most of the high street finance companies have totally withdrawn from  the asset finance and leasing  sector. The likes of Bank of Scotland and  Barclays used to have very active asset finance divisions which they have completely closed down. It didn’t matter if you didn’t bank with either of these two companies they would do lease and hire purchase deals for just about anyone. Nowadays they wont even do deals for their own customers. If hey do they tend to do it on loan facilities and obtaining funding is very difficult as you will be dealing with the usually slow banking process.

Thankfully there are one or two finance companies still lending money via the broker market however they have become more choosy as to what deals they will do. It is simple supply and demand. They don’t have as much cash as they used to do and they have far more delays to do then they used to have. Combined with an increasing bad debt provision it becomes understandable as to why it is getting harder to obtain credit.

It is therefore imperative that any application for finance is presented to the finance company in the best possible manner. WE don’t necessarily require projections business plans and cash flow forecasts. However we do need an understanding as to the rational for the purchase and we also need to evidence serviceability. So long as we have some recent management accounts and 3 months bank statements we will be very quickly be able to provide an indication of terms for  any available finance. It is far better to get all this information up front rather than presenting it to the finance company in dribs and drabs. We can help a business get the right information together.

Invoice factoring and overpayments

Tuesday, February 9th, 2010

We all know that an invoice factoring can provide immediate cash of  up to 85% of unpaid invoices. This provides valuable cash and working capital when a bank overdraft might not provide enough of a working capital facility. However there are instances when this might not be enough. Depednding on  the seasonality of your business and timings of payments to key suppliers and Vat returns etc there might be occasions when an overpayment is required. Therefore it is imperative that when choosing a factoring or invoice discounting facility that the flexibility and approachability of the finance company must be taken into consideration. Not all finance companies are the same and a proper invoice factoring company will be able to help you in times of need.

XL Business Finance has helped many business find the most appropriate and flexible finance company. As a rule the larger independents tend to be a little more flexible and as such they are more amenable to overpayments. They would normally only advance up to 100% of the outstanding debtor book unless there is additional security available to provide the necessary cover. Try and approach yoyr local bank manager to organise an overpayment. It just wont happen. With a independent provider you are never more than one or two phone calls away from a decision maker and as such they are far more flexible.

When we say independent finance company we mean one that isn’t bank owned or doesn’t borrow money from the banks to lend money. There are plenty of so called independent invoice factoring companies that borrow money off the banks and as a result tend to have the same sort of restrictions that the banks have. A rue independent is one that does not borrow any money off the banks and it is these that tend to be more flexible.

Invoice financing and trade facilities

Monday, February 8th, 2010

Invoice financing can provide  much needed working capital however when combined with an international trade finance facility the two  facilities dove tail to provide the complete funding solution. Any businesses wishing to import goods from a foreign country can do so without having to use any of their own capital provided that you have guaranteed orders in the UK. On trhe back of these orders the finance company will provide the cash to import the goods. As soon as the goods are delivered to your customers premises, you will raise an invoice. Either the customer pays immediately and the trade facility is repaid in full or you provide your customer with credit and the same finance company provides an invoice discounting or factoring facility against your invoices and the proceeds are used to pay the trade facility.

This process would seem pretty simple however not all financial institutions provide the two services together. If you went to the bank asking fro a trade facility the amount of credit you are provided with will depend on the length of time your business has been trading, how profitable it is, and the level of available security. Providing a one stop shop is difficult in that it is a very specialist market however once you know which funders are in the market you might be pleasantly surprised as to the level of funding available.

XL business Finance has been helping many businesses trading internationally with cash flow solutions. We know depending on your location . length of time in business and the level of profitability which invoice financing company will be best suited for your particular business. The good news is that you don’t necessarily have to have a stack of security available. Thankfully there are a number of independent finance companies that providing the exit route is watertight they will take a commercial view.

Invoice Finance and stocking Finance

Sunday, February 7th, 2010

Invoice Finance can potentially provide so much more. As we know a factoring and invoice discounting facility will release up to 85% of a businesses unpaid invoices. In the very difficult period of obtaining cash flow from the banks it is important that a business obtains as much benefit from their invoice finance facility as possible. Obtaining stocking finance on the back of an invoice finance facility might provide your business with the additional working capital required to make the difference between success and failure. Not all stocking facilities are the same and XL Business finance has over 10 years experience in helping businesses find the right funding solutions.

At the moment there are no finance companies providing stand alone stocking facilities. Any stock finance is provided on the back of a factoring or invoice discounting facility. However beware there are only one or two funders that provide a true revolving stocking facility. Most invoice discounting companies suggest they provide  finance against stock however what they actually do is provide a further advance up to 100% of the debtor book using the stock as the additional security. In addition they claw back the overpayment over a 12 month period for example. A true revolving stocking facility will provide a percentage of the total stock in addition to the agreed prepayment against the debtor book.

Invoice discounting for a phoenix company

Friday, February 5th, 2010

There are a vast number of businesses going through a prepacked administration process at the moment. These are commonly known as a phoenix company. Agree or disagree with the concept they are an option open to many struggling businesses and are widely being recommended by many insolvency practitioners. However obtaining invoice  finance coming out of the other side might not be as straight forward as one might think. It is very unlikely that a bank will finance a phoenix company. There are a few independent finance companies that will finance a phoenix company however the majority will offer factoring or disclosed invoice discounting. There are only one or two finance companies offering confidential invoice finance facilities. Whether you are offered a confidential facility depends upon how you have conducted t your previous business. All factoring and invoice discounting will take a reference from any previous invoice finance company. In a nut shell if the old factoring or invoice discounting has managed to collect out the old debt you have a much greater chance of being offered a confidential facility. If however the old finance company has struggled to collect out the old debt then you have less chance of being offered a confidential facility.

Obtaning Business Finance in a Summer Recovery?

Wednesday, February 3rd, 2010

According to a recent quarterly business  index economic survey the general feeling amongst North West Businesses is that their is an air of optimism and enthusiasm about the future. However many of the businesses feel that trading conditions are worse than they were 12 months ago.

In addition 55 percent of the businesses feel that the economy will have recovery by the summer of this year. However one in five feel that it will be two years before the economy fully recovers suggesting that certain sectors of the economy have been hard hit.

This Business factors index has been provided by Bibby Financial services. The index tracks small businesses turnover since 2007 and the trends and information have be collated with the results of over 300 business interviews.

The optimism must be offered with caution. One in five feel conditions are worse than they were 12 months ago. In addition many have had to take cost cutting measures. And one in five don’t think the economy will ave recovered in two years.

Firms in the North West with many involved in Manufacturing have had a tough time during the recession and while we don’t expect an immediate recovery it is clear that many businesses have experienced a difficult few months. Although 2010 ha already provided a number of challenges such as the adverse weather conditions  a weak pound is fueling export growth and as such confidence is slowly starting to improve. It suggests that moving forward business are optimistic about their prospects of a recovery.

The upshot is  that it will continue to be difficult to obtain business finance. However XL Business Finance has experience of providing innovative finance solutions whether it be equipment finance refinance of existing equipment. We are also vastly experienced in providing invoice finance solutions whether it be factoring or invoice discounting. Give us a ring a ding ding.

Protect your cash flow with factoring

Tuesday, February 2nd, 2010

Still one of the biggest complaints we have from customers is the length of time it is taking their customers to pay. Fr0m the smallest of companies to the  the biggest PLCs the word on the street is that businesses are taking longer to settle their debts. Debt turn is increasing causing further misery on already cash strapped businesses. The good news is that factoring with the right finance company will not only release up to 85% of your unpaid invoices it will also provide a credit control facility whereby the finance chase your debts on your behalf.

Beware though not all factoringcompanies are the same. When credit terms are being stretched to the limit it is important that you get a factoring company that has a reputation for collecting invoices quickly, professionally and efficiently. You ill be surprised that there is a massive difference between service between invoice finance companies. For example many og the high street bank based factoring companies will nly chase your top 3 companies the leaving the rest to be chased by letter. No wonder some of the high street banks can do it so cheaply. Remember factoring is a value added product and by a certain degree you get what you pay for.

Other factors also needed to be taken into account. For example some the largest based factoring companies  will have their credit control in one town, their payment centre in another end of the country and their sales office in timbuktoo. How can they possibly provide an efficient service. In a nut shell they don’t . Monies get paid to suspense accounts while they run around trying to work out where they need to appropriate the cash.

To find out which invoice factoring company will be best for your business give Managing Director Mark Redman a call on 07748 635 206 24/7.

Business Financing with Adverse Credit

Monday, February 1st, 2010

Although we are officially out of the recession i firmly believe the economy is still on the edge. As such it will be a long time before banks and high street finance companiesgo back to their cavalier days of lending money to any tom dick and harry. It is bad enough getting finance with a clean credit history and even more difficult if you have any adverse credit. this doesnt mean you wont get finance however you can expect to pay more in terms of interest rates and you will also find the security required will be more onerous.

Luckily XL Business Finance has been helping business for many years with all kinds of business financing requirements. We know how to structure a finance proposal to ensure you have the best possible chance of success. We can very quickly find any adverse data recorded against a limited company and it is advisable to get copies of satisfaction certificates or confirmation of settlements in advance of the application. At very least we need to provide an explanation as to how the adverse info came about and what the plans are if any to address the situation.

If as a director of a newly formed limited company or a transaction which requires the provision of a personal guarantee any finance company will carry out a credit check on you personally. They will need permission of course and if you approach more than one finance company this may leave multiple searches and potentially adversely affect your personal credit score. If you are going to be undertaking a round robin of the UK based leasing and invoice discounting companies we recommend that you obtain your own personal credit reference report. This is cheap and easy to do. If you cant be bothered than we can do it but we will require written confirmation to undertake the search on your behalf.

 

 

 

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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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