Asset finance leasing - XL Business finance

Cash Flow Loans Explained

February 8th, 2011

There are many types of cash flow loans available to commercial businesses however we thought it might be worth explaining the different options. A cash flow loan in the traditional sense is a loan from a bank based on the performance of the business. Rather than securing the loan against bricks and mortar a multiple of the profitability is lent to the customer. These types of loans reached their peak in the run up to the credit crunch however are only starting to make somewhat of a recovery.

Whilst factoring , invoice discounting and even bank overdrafts are a form of cash flow loan they are different in that they are secured by other means. Factoring and invoice discounting facilities are secured against the debtor book and overdrafts are more often than not secured against bricks and mortar and even personal guarantees. Obviously it is possible to obtain a bank overdraft without security however you will probably know only token overdrafts are available from most banks without the benefit of tangible security

Cash flow lending was very prevalent in the acquisitions and mergers market  where significant sums were required to purchase a profitable business however there was very little security in terms of  property, findable debtor book or plant and machinery. A traditional asset based lender will lend cash against some all all of these tangible assets.

As with any financial institution the parameters for cash flow lending will vary greatly. An experienced commercial finance broker will have their finger on the pulse and will be able to help you find the most appropriate finance company. Don’t get too excited because we believe that this is still the most difficult area for funding and it will take time before the banks fully regain their confidence in this sector

Commercial Mortgages Explained

February 7th, 2011

Commercial Mortgages are probably still one of the hardest business finance product to obtain. The following article explains why you can longer rely on the value of the property to obtain funding.

 Gone are the days when you could get funding at 70-80% of the valuation without having to go through the in and outs of a ducks whats it. Nowadays it is all best of serviceability,cash flow and the quality of the tenant. By tenant we mean the business that is in situ and who ultimately will be paying the mortgage. The tenant could be the owner of the property or the lessee if the owner is sub leasing.

 In the current economic climate commercial mortage lenders will only lend up to 70% providing serviceability is undoubted. If not they will lend up to a max of 70% but do some calculations based on profitability. We have seen many instances where a property has been valued at £1.0m plus however the  serviceability has been an issue and funding was only achievable at 40% of the value.

Commercial mortgage lending is no different from any other type of lending. There will always be slight variations throughout the market. In addition different banks blow hot and cold in terms of their appetite for different sectors and industries. Different banks and commercial mortgage lenders do things is slightly different ways and as such it is worth speaking with a commercial mortgage broker who knows the market inside out. In addition they  can collate all the right information that the different lenders require saving you valuable time and money.

Print Refinance and Factoring Package

February 4th, 2011

Chad Monsirrims continues to look for a serial number following a refinance package and provision of a new factoring facility for a Manchester based print company

A Manchester print finance company needed to restructure their finances following an accumulation of VAT and PAYE arrears totalling approx £35k. Their existing Komri printing press had only 18 months to go with their existing funder. XL Business finance was able to refinance the machine and provide enough money to repay the existing leasing company , pay the VAT and PAYE arrears and also provide a surplus for additional working capital. Happy days.

In addition the business switched to a more flexible factoring company to provide additional working capital. The printers existing bank were severely restricting cash flow due to a difficult trading period, hence the crown arrears. A change in factoring company and the refinance of the existing press gave the business a new lease of life.

At one point the company was considering injecting personal cash secured against the press. Whilst this seems a good idea , obtaining title in a refinance situation can present many pitfalls. If the documentation was not completed correctly it may be possible that they could be accused of selling the press under preferential terms resulting in the transaction being null and void. It would also been imperititive that the customer got the right supporting documentation. If you do not get debenture waivers , proof of title etc it may be possible that a transaction be deemed null and void in the event of an insolvency. A specialist refinance company ensures that all this is correctly boxed off and that there can be no repercussions down the line.

Refinance printing Machine

February 4th, 2011

XL Business Finance associate Chad Monsirrims checks a serial number following another successful refinance

Credit Insurance explained

February 3rd, 2011

It is widely believed that credit insurance can only be obtained on the back of a factoring or invoice discounting facility. This is not necessarily the case and it might be that you can obtain a better deal from an independent company. You may also wonder why one invoice finance company can insure one of your customers but not another. Hopefully this article will explain some of the misconceptions.

Any business can go to a specialist insurance company to obtain credit insurance. The broker will go to the various insurance companies and obtain a packaged policy from the best insurance company. There are a number of fundamental differences which may work in your favour.

Firstly credit insurance companies provided by the banks and the factoring and invoice discounting companies only kick in in the event of an insolvency situation. It is indeed possible to obtain credit insurance that kicks in in the event of a protracted claim. As far as we are aware we there is only one invoice discounting company that provides credit insurance in the event of a protracted dispute. Call me cynical but does anyone else think that factoring companies allow debtors to exceed 90 days so they can.

Secondly factoring and invoice discounting companies  charge against the gross ledger as opposed to the net ledger which is possible to do via the correct means.

Thirdly once a debt has exceed 60 days over the normal credit terms the insurance provider will chase the debt on your behalf provided. It doesn’t matter if if your factoring company is supposed to be doing it. two so to speak is better than one

It also possible to get credit insurance for export debt as well

You may also wonder why one factoring company can insure a debt another factoring company cannot..

Factoring Finance explained

February 2nd, 2011

Factoring is simply the ability of a business to raise cash against unpaid invoices. Typically 80 % funding can be obtained however depending on a businesses personal circumstances a higher payment or even a lower prepayment may be available.

Unlike invoice discounting factoring is provided on a disclosed basis which means that your customers are aware you are factoring your invoices. In fact you will add to your invoice a clause asking that payment for the invoice is paid direct to the finance company. Upon receipt the finance company will pay the remaining 20% due to you less their interest charges and fee for running the account.

Factoring can also provide full credit control leaving you free to run your business instead of worrying about chasing your customers for payment. It is important to remember that factoring is a value added product and is not just about providing a cash flow facility. What is the use of having the cheapest funder in town if at the end of the day they are hopeless at collecting your unpaid invoices. This is where a good independent factoring broker can add value to the decision of choosing the right funder

There  are many criteria that you should consider when choosing the correct factoring company for your business. If you are a new start business there are finance companies that are geared up specifically for this purpose. Also your geographic location should have a significant bearing on your decision as some of the smaller independent that can provide a n excellent service but  are very much locally based. also the nature of your business and the type and quality of your debtor book will also have a bearing on your final choice of factoring company.

There are plenty of companies to choose from and as such a good impartial view point will have alot of time and potential future heartache!

Factoring for a new start Business

February 1st, 2011

Believe it or not, even in the current economic climate, there are still one or two individuals wanting to start a business . Madness I here you shout. However in fairness they are tending to be characters that have been around the block a few times, are quite well respected and connected in their particular sector, have maybe gone off to do something else and then think blimey I can make a few quid here when things really start to pick up. Factoring is nearly always a product that most new businesses automatically require. Cash is king they say. Save your cash for the unexpected and fund as much as possible in the business.

However there are so many different factoring companies available how do you know which one to choose. In our opinion it is relatively simple. A good factoring broker should be able to point you in the right direction. For starters a new start business is probably best steering away from the banks. Banks might be OK at providing invoice discounting facilities for the more established business however factoring is all about adding value in terms of providing an efficient credit control service and providing the right level of funding against he debtor book. In our opinion and many other professionals in the financial community will agree, that locally based and  independent factoring company is better placed to provide such a service. Independent in that they are not bank owned but they do lend their own money.

Independents tend to specialise in factoring. It is their core product unlike the banks and some building societies that have jumped on the band wagon of offering factoring and invoice discounting. XL business Finance can help a new start business assess the right type of funding partner for their business. Any recommendations are based on location, sector, projected,  turnover and type and quality of the debtor book

Machinery Refinancing

January 31st, 2011

During January our biggest type of of enquiry was for businesses looking for machinery refinance. I suppose that you can look at this from two angles. A business may need to refinance because they are struggling, running out of cash and need to find some funds from somewhere to keep the business afloat. Or they need to refinance machinery because they are doing well, need some additional working capital because the banks are unwilling or unable to help

Most business owners will say it is the latter however in a small number of cases it may genuinely be because a business is struggling. Any asset based finance company will always be willing to lend against the value of an asset providing they are doing so for a positive reason. On the other hand if a business is struggling they may insist that you take advice from a specialist accountant or insolvency practitioner.

It maybe that it it is better to fund a business following a pre packed administration particularly if there is a lot of creditor pressure and crown arrears. Many business owners think that it is not possible to obtain funding following a pre packed administration. In reality, asset based lenders would probably prefer to fund such a arrangement because the new business going forward will be leaner and meaner. It is true that a bank may not wish to assist with the funding however in reality this should not cause any major problem going forward. An independent invoice finance company will be happy to provide a factoring facility and as such there should be no need of a bank except for clearing cheques.

Equipment finance in 2011

January 27th, 2011

The hire purchase and leasing market in 20011 is predicted to remain fairly tight and restrictive. There are still a few high street banks offering decent rates and there are still a few independents offering prime rates also. The fact remains that are still fewer finance companies than there were before the credit crunch.

Although there are a few finance companies entering the market. Aldermore at the beginning of 2010 and much later in the year Conniston came across the water from Isle of Man. with any new finance comapnies entering the market this is great news however there is always a bedding in period as they find their place within the market.

Asset based lending remains strong although there a fewer options than there used to be, The most obvious company being Davenham which ceased trading at the back end of 2010.

As per usual if you have a very strong balance sheet it can be relatively easy to obtain funding for asset and equipment finance. It is also relatively easy to obtain funding if you have plenty of value within your equipment. The problem arises is if you have a weak balance sheet and you need to purchase or refinance assets with very little residual value. Caught between a rock and a hard stone comes to mind.

XL Business finance has helped many businesses with their capital expenditure plans. We provide an honest and straight forward approach and always have the businesses best ineterst at mind. Give us a call today to find out how we can help you.

Refinancing Engineering Company

January 26th, 2011

XL Business Finance has just recently completed the refinancing of a UK based Engineering Company.  Managing Director Mark Redman can be seen checking ( or trying )  serial numbers on the customer’s equipment. See below for further details

XL Business Finance was approached at the beginning of the new year by the companies accountant to help a UK based Engineering company purchase new equipment for an existing project. At the same time the business wanted to future proof their cash flow and refinance their existing equipment to reduce their monthly outgoings. Although the new equipment was only £30k a refinance package including the funding of the new kit reduced their monthly repayments from £3500 per month to £2800 providing a monthly saving of £700.

XL Business Finance is one of the UK’s leading independent finance companies with over 10 years experience in the asset and asset refinance market. As with any financial market products and availability of funds vary from month to month with the various funders.  The company accountant for this particular engineering company realised the added value a specialist finance company would add to their their client. XL Business Finance was able to source the right level of funding at the most competitive rates and at the same time ensure the finance company completed all the paperwork in a timely and professional manner.

In light of the newly released quarterly trading performance we are in no doubt in line for another rocky 12 months . Refinance of existing plant and machinery may just give many businesses a life line to provide enough working capital to survive until the next upturn


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.

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