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Archive for November, 2010

Construction finance for contractors

Wednesday, November 3rd, 2010

One of the most common enquiries we get is for contract businesses looking for additional working capital to expand their businesses. The problem is that they have been to the bank and been refused an overdraft and they have been told they are ineligible for factoring or invoice discounting due to the nature of their contracts. The good news there are a number of invoice finance companies that other construction finance or contract finance.

We had such an enquiry just yesterday. As per normal the enquiry was for a different  however unsuitable form of finance. The enquirer had been told by a number of different sources that they were not eleigle for invoice finance and as such they had been trawling the inter net for business loans and approaching the banks for overdrafts. As we know the banks are\ still being over cautious resulting in a number of dead end enquires.

XL Business Finance with our ten years of experience in this sector was able to introduce a number of specialist funders that would be willing to fund invoices raised against contracts. Hopefully this will give the business the much needed working capital to grow and expand the business and take on more available contracts.

Stocking Finance explained

Tuesday, November 2nd, 2010

There are a number of variety of stocking finance options and depending on your particular circumstances there are a number of different products. Depending upon the the finance company you approach these different products may be called something completely different from one finance company to another.

Firstly let me explain we are unaware of any financial institution that offers stocking on a stand alone basis. It is usually provided with another finance product.

The most common form of stocking finance is provided on the back of a factoring or invoice discounting facility. A true stocking facility will provided a a percentage of the total monthly stock on a rolling contract. Beware certain invoice finance companies offer stocking finance but t is only to provide additional security to enable them 10% of your debtor book. Whilst funding in this instance  is technically stocking finance the over payment will be reduced over a period of time. There are only a few invoice finance companies that offer the full rolling stock facility and therefore it is worth giving us a call to check.

Stock finance may also be provided as part of a trade finance agreement. Where a business has confirmed orders it may be possible to obtain 100% funding from start to finish. This can either be on a domestic basis or on an international basis. An international trade finance facility will enable a business to import goods and where there are confirmed orders finance can be obtained from start to finish. When the goods are delivered to your customers premises a factoring or invoice finance facility will dovetail with the trade finance facility and provide seamless funding. Therefore technically speak international trade and domestic trade finance could be viewed as stocking finance as well

Cash Flow Loans Explained

Monday, November 1st, 2010

A traditional cash flow loan from a banks point of view would be based on the turnover and profitability of a business. Before the recession cash flow loans were a prelevent form of bank lending.  They were often used in management buy outs to raise cash to buy the businesses along with other purposes. It was not out of the question to raise funds many times greater than the actual value of the tangible assets of the business.

During a buoyant economy this kind of lending is absolutely fine however as soon as things slow down, as they did recently, serviceability may become an issue and as such the banks find themselves with large loans to businesses with very little or no security. It is no wonder the banks have had such a slating recently for lending on this basis. The recession hits and the banks no longer lend on this basis and are accused of not lending any money. It appears to me that they dammed if they do and dammed if the don’t.

The alternative to cash flow lending is asset based lending whereby a bank or financial institution lend against the asset of the business. These are predominantly invoice finance companies that will lend up to 90% of a businesses debtor book, provide a commercial mortgage, lend approx 50% against any unencumbered machinery and also have the ability to lend against stock and in  certain circumstances provide international trade finance.

Whilst a bank has the ability to provide asset based lending they don’t tend to have the expertise as some of the specialist lenders and as such it is often worthwhile speaking to an independent business finance specialist to see what alternatives are available. XL Business has over 10 years experience in helping businesses in this often overcomplicated sector of business finance.

 
 
 

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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