Asset finance leasing - XL Business finance
XL Business Finance Blog » Blog Archive » I want invoice discounting but I have only been offered factoring!

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

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.

Tags: , ,

Comments are closed.


 
 
 

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