Asset finance leasing - XL Business finance
  XL Business Finance Blog » 2010 » May

Archive for May, 2010

How to transfer existing leasing agreements in event of an administartion

Wednesday, May 12th, 2010

Love or hate them pe organised administrations or prepacks are an inevitable part of the economy today. In theory they sound great. Dump the old company together with all the old debt ( mainly crown arrears) , buy the business back off the administrator and start a fresh with a new meaner and leaner phoenix company. It has been well documented that obtaining  cash flow finance such as factoring or invoice discounting can be relatively straight forward however it may not be so simple in transferring existing hie purchase and leasing facilities from the old co into the new co.

How easy or difficult this may be depends upon the finance company involved and whether it is a finance lease or hire purchase facility. In the event of an administration if the equipment in question is on a hire purchase facility than the administrator has the right to any equity in the agreement and may take this into consideration when negotiating a purchase price for the business. If the agreement is subject to a finance lease then control of the agreement rests with the finance company. In theory the finance company can terminate the agreement, repossess the kit and sell the equipment and pocket any profit. Thankfully this doesn’t happen very often but none the less it is something that could happen.

It would therefore seem allot simpler if the agreements could be transferred or novated into the new co. Unfortunately many of the high street finance companies will not simply transfer the agreement into the new co. They have a policy of not supporting phoenix companies. There are one or two that do but they underwrite the new co as if it were a new deal so there is no guarantee. If they don’t like what they see they will provide a settlement figure and give the  business the opportunity to finance the kit elsewhere. Some of the specialist funders do not have an issue in transferring the agreement into a new co. Beware some will transfer the agreement like for like whereas others will charge full outstanding rentals and then roll this into a new co.

Turnover too big for my invoice discounting company

Tuesday, May 11th, 2010

On the face of it one invoice discounting is the same as another invoice discounting company. For the majority of businesses this probably the case. However as mentioned on previous blogs all finance companies have their own sweet spots and this includes the total exposure they will go to or one company or in other words the total amount of funds out. If you find that your invoice discounting or factoring company is restricting your overall credit limit then t might be time to seek an alternative view point. As one of the UK’s  leading invoice finance brokers we believe we are well placed and qualified to help you with such matters.

There are usually a number of different reasons why a finance company will restrict your overall limit. It may be because your business has had a dip in performance and they wish to monitor your activities more closely. The banks in particular will get nervous in this situation and as such try and reduce their overall exposure. At a time when your business needs cash most this can be massively inconvenient and can possibly make the trading situation worse.

It may be that you have beached your covenants. The most common being pre invoicing or misappropriating cash. More often and not these more serious breaches result in being given a red card. When faced with a potential new funder it is always best policy to come clean and explain the reasoning behind your actions. All factoring and invoice discounting companies will take a reference and any misdemeanours will always be found out.

Or it could be that the finance company is  uncomfortable with  the overall  exposure not because there is anything wrong with your business but because the funding limit is getting too big for that particular business. In this situation an amicable parting ways is usually the best option. Even some of the high street banks get nervous with some of their larger clients and as such some professional advice and help will enable you to find the most appropriate funding partner.

Aldermore Bank Plc enters asset finance market

Monday, May 10th, 2010

In the last  month or so a new asset funder has entered the broker market providing a much needed alternative to ING  Lease. Aldermore Bank have entered the  asset finance market as a direct competitor or alternative to ING.

Not that there is anything wrong with ING Lease. Far from it. Over the last 10 years they have been without a doubt the most consistent and effeficient finance provider  in the leasing and asset finance market. However during the last eighteen months  they have been the only serious  funder. Prior to the credit crunch there were at least 4 finance companies that we could have obtained competitive finance and hire purchase facilities. They include Lombard, Barclays, Yorkshire Bank and ING Bank. All were doing extremely competitive deals in order to win your business. However as the credit crunch took hold they all withdrew their leasing facilities and were only doing deals for their very best customers. As such ING has been bursting at the seams and once a customer was at he maximum level with INGthere has been very few alternatives. The only alternative were very expensive second or third tier lenders that without a doubt would have all required guarantees irrelevant as to the quality of the covenant or asset based lenders that are only able to lend against the trade value of the kit.

Therefore having a new prime funder in the market is good news for everyone including ING. Whilst we are not expecting Aldermore to replace ING they will certainly mop up the stronger credits where ING are full. I think it will take some time before they take on the marginal deals but none the less still good news!

How to choose an invoice financing company

Sunday, May 9th, 2010

Without a doubt invoice financing is still the most buoyant and flexible form of business finance today. However there are so many different invoice financing companies and products  to choose from how can you be sure that you are using the most appropriate and best value funder for your business. Luckily XL Business finance has been helping businesses for over ten years to choose the most appropriate funder.

Too often the easiest option is to be  railroaded into your clearing banks factoring or invoice discounting company. This may not always be the best option. As you probably know factoring and invoice discounting release up to eighty percent of a businesses unpaid invoices in ready cash ready to be used for working capital requirements.  However there a number of factors that need to be taken into consideration when choosing a finance company. Like any business different factoring and invoice discounting companies have different sweet spots. The problem with the high street banks is that try and be all things to all men and can often fall short on service and delivery compared with other independent providers. In certain circumstances the bank may be the best choice and indeed one bank in particular is exceptional providing international trade finance whereas another is most excellent in providing funding against contractual debt.

In addition certain finance companies are most excellent at invoice discounting but struggle to add the required level of service to deliver a competent full factoring service. When it comes to full factoring with credit control and debt collection specialist and independent factoring companies provide a far superior products to the banks. It can be difficult to argue against the banks when it comes to invoice discounting however there are benefits to choosing a third party provider such as not having too many eggs in ones basket.

Refinance existing plant and machinery and release cash for any purpose

Saturday, May 8th, 2010

It is possible to refinance existing plant and machinery in order to release cash for any purpose ( within reason ) Provided there is equity within your plant and machinery there are a number of finance companies that will advance cash via  a sale and lease back or sale and hire purchase back agreements. And provided your business isnt on the verge of going bust you can release cash for most purposes including providing a deposit for a new machine , paying crown arrears of provided working capital to nge better payment terms with your suppliers

However refinancing existing plant and machinery is a very specialist area which the high street banks and leasing companies have absolute no experience or appetite. There are probably only about half a dozen leasing company in the UK that provide such a facility. As it s a specialist area funding comes at a premium so you can expect to pay slightly higher interest rates than you would get via the bank. However with the banks still being difficult when it comes to obtaining funding asset refinance is a viable option for many businesses. Not all types of assets are suitable security and as such it is worth getting an idea of the value of  your equipment before spending allot of time and effort providing financials etc. The types of equipment and machinery that are suitable are large chunky items such as printing, packaging engineering, commercial vehicles, coaches,  yellow plant  and basically any equipment that has a good residual value in the second hand market. Anything that is bespoke to a business tends to struggle to stack up even though it may have initially cost a considerable amount initially.

XL Business Finance will use over ten years experience to get the best possible valuation for asset refinance. Different finance companies have different areas of expertise and we know which one will provide the best possible values for whatever kit it is that your are looking to release cash against

invoice finance or bank overdraft

Friday, May 7th, 2010

As you will gather if you care to read through any of blogs that this is a favourite subject of mine. And for good reason too. We have seen a number of what looked like very strong businesses fall foul to the banks in terms of having too many eggs in one basket. Although the banks will never publicly admit there appears still to be a tendency to call in their security if they think they have half a chance of clearing their debt. A bank that has a debenture over the business can appoint an administrator at any point they wish to do so. And how do they obtain a debenture. well you would normally give it when you take out an overdraft. Just one of those documents that they slip under your nose when signing all the other paperwork. Overdrafts are always repayable on demand and for this reason we believe that any form of invoice finance is a far better alternative.

Invoice finance which can either be factoring or invoice discounting cannot be withdrawn at a moments notice and so long as you are operating within the terms of the facility should provide you with a reliable and consistent form of cash flow finance. Unlike a bank overdraft which is secured by bricks and mortar and or a personal guarantee invoice finance is secured against your unpaid debts. So long as your customers pay their debts you should never be at risk. In addition it is often possible to obtain credit insurance for if any of these customers god forbid go bust on you.

A Guide to Invoice Financing

Wednesday, May 5th, 2010

Again Invoice financing is a generic term for factoring and invoice discounting all of which provide funding against your unpaid debtor book. Because invoice financing is secured against your debtor book it is a very flexible form of finance that grows with your business. It is fast becoming the first choice cash flow facility for many businesses replacing bank overdrafts which by comparison are restrictive in terms of proving cash and onerous in terms of security and flexibility.

Invoice discounting is usually provided in a confidential manner and is normally appropriate for businesses that are established , profitable and have good internal credit control procedures. Most invoice discounting companies will release up to 80% against your debtor book with the remaining 20% being paid to you when your customer pays less any charges due.  There are usually two charges for the operating the facility. Firstly there is the interest charge , an amount over bank base rate which is applied to the amount of cash you actually borrow and not the facility amount. The rate is usually comparable to a bank overdraft and in some cases can actually be cheaper. The second charge is for operating the facility and this is charged as an percentage of actually turnover. The amount charged depends upon the turnover, the number of invoices and also the quality of your invoices. Most invoice discounting companies have a comparable charging structure.

Factoring is usually provided on a disclosed basis SO that your customers are aware that you are factoring your invoices. Because factoring finance is provided in a more open format it is usually available to most businesses including new starts , loss making businesses and businesses that have been declined invoice discounting. The facility is provided in exactly the same way however the factoring company will be responsible for credit control and will add value to your business for making sure that your invoices are paid on time.

A Guide to Invoice Finance

Tuesday, May 4th, 2010

Invoice Finance is the means of obtaining cash against unpaid invoices. More and more debtors or customers require up to ninety days credit terms in order to pay for their goods and services. Invoice finance provides up to 80% of these invoices immediately providing a valuable working capital facility.

Confidential invoice discounting is a form of invoice finance and as the name suggests the facility is provided in a format whereby your customers are unaware that you are discounting your invoices. Many businesses for a variety of reason would rather keep these matters confidential. However confidential invoice discounting is not on offer for every type of business. Invoice discounting can be susceptible to fraud and as such a business must be well established, be profitable with a sound and profitable trading history. A suitable credit control system must also be in place which the potential finance company will require to check o ensure you are capable of collecting your invoices.

Factoring which is similar to invoice discounting provides credit control as an additional feature. The factoring company will chase your customers ( usually by phone) on your behalf to ensure your invoices are paid in an efficient and timely manner. As your customers are aware that you are factoring your invoices and the finance company is in regular contact with your customers the facility is less susceptible to fraud.  Therefore just about any type of business will be able to obtain a factoring facility. New starts, loss making businesses, phoenix companies are all welcome to apply!

 
 
 

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.

 

Manchester, Liverpool, Leeds, Preston, Sheffield, Stoke, Merseyside, Lancashire, Cheshire, Staffordshire