Asset finance leasing - XL Business finance

We’re Back!

October 15th, 2010

Following the construction of our fancy new website by our good friends at Marketing Insite we are hopefully  back in the  swing of blogging. Yipee I here you cry. Not!

During the last few months or so it is fair to say that obtaining business finance still continues to be difficult especially when it comes to dealing with the banks. Business directors and owners are also beginning to realise that the Enterprise Finance Guarantee Scheme ( EFFG) as provided by the banks is not what it is cracked up to be. Unless the bank wants to deal with you in the first place and the lack of tangible security is the only thing stopping the bank wanting to do the deal then the banks  will not offer funding.

In addition it was also possible to obtain grants and loans via local development agencies. Due to the government cut backs these have all virtually disappeared. So what options are there left for businesses requiring additional funding?

There is and always will be various hire purchase and finance lease companies offering funding , however due to supply and demand of funds it is worth consulting a good independent finance broker to search out the best possible deals. More often than not many businesses require additional working capital facilities. We have never been a great fan of bank overdrafts due to the fact they can be quite restrictive and are always repayable on demand. So that leaves us with traditional factoring and invoice finance facilities. Once upon a time this was viewed as a lend of last resort however invoice finance is still one of the most competitive and buoyant growing areas of finance. In addition competitive funding is provided by a large variety of independent companies , banks and building societies all offering slightly different products for different types of businesses.

Asset Refinance Explained

May 27th, 2010

Businesses may wish to refinance assets for many reasons. It could be to help with the consideration of a Management Buy Out, it could be to raise a deposit for a new capital investment or it could be to help with working capital if cash is a bit tight. XL Business Finance has been helping businesses for over 10 years to refinance their existing plant and machinery.

Asset refinance is a very specialist market and one that is not traditionally catered for by the high street banks and finance companies. Therefore it is important to know which finance companies specialise in what sector in order to get the best possible value against your kit. There are probably only half a dozen asset lenders operating in the market today and although they are very similar in terms of pricing they have their own niche areas and slightly differing ways of doing things.

As with any asset refinance deal the most important thing is to get a accurate list of kit together. This should include age, make model, description and condition of the kit. Any additional features or enhancements should also be noted to ensure we get the best possible valuation. Depending upon what the kit is we can then go to a variety of different funders that all have slightly differing ways of valuing the kit. It maybe that we have to go to the best valuation in order to make a deal happen. Remember that we can also include kit that is already on finance because it might be that there is some equity that can also utilised.

Factoring a scaffolding company

May 25th, 2010

On the basis that most scaffolding companies are working to contract many such businesses wrongly assume that they are not eligible  for a factoring or invoice discounting company. The good news is that one or two invoice finance companies will provide a factoring service.

However these factoring companies are not your high street banks but independent companies that specialise in factoring and construction finance. They have their own in house quantitative surveyors that can accurately asses the value of work undertaken. It is very unlikely that a scaffolding company will get the full 80% but more likely that a maximum of 60% prepayment will be achievable. In addition the factoring company will be looking to make sure that all the scaffolding equipment is mainly free of finance. This is because they wouldn’t want a leasing company removing the scaffolding half way through job and thus making all the contract null and void.

The finance company needs to know that they have control over the equipment in the event of an administration so that they can finish the job and get paid. Any factoring company that doesn’t understand this is potentially putting the directors at risk via any personal guarantees that may have been given. Ass such it is worth giving us a cal to see if a factoring facility will be beneficial to your business. We have over 10 years experience in this market and we are certain that we can add value to the proceedings.

Asset Finance in an MBO

May 24th, 2010

Asset finance can play an important part of the overall consideration in a management buyout. Although it is often the last piece of the jigsaw it can make the difference between making a deal happen and not making a deal happen. Furtherm0re it is imperative that you get a decent asset finance broker to coordinate the best possible deal.

Once upon a time it was very easy to obtain a cash flow loan from a high street bank against the overall facility. A cash flow loan is an amount a bank will advance based on the profitability of a business. Before the credit crunch and the recession these cash flow lends were relatively easy to obtain as the banks were awash with cash and fighting tooth and nail to do deals. How things have changed. An MBO is nowadays funded by the cash within the business ( if there is any), refinancing any property using the debtor  book  via factoring or invooice discounting and more often than not some deferred consideration.

In terms of the asset finance you will obtain funding from a specialist asst based lender. Refinancing of plant and machinery for such purposes is a very specialist market and it is mot usually provided by the high streets banks and finance companies as they do not have the same expertise. There are currently about half a dozen asset based lenders and they all do things sligtly differently. They all have a niche area and value different types of kit in different sectors slightly differently.

Using an Invoice Finance Broker

May 21st, 2010

Any search on the world wide web will reveal numerous factoring and invoice discounting companies. Some of them will be actual lenders, others will call themselves “independent” in that they are not bank owned but they are still a lender and some ae brokers. In our opinion using an invoice finance broker will save you the most time and help you obtain the most appropriate funder for your particular requirements.

However there are two types of brokers. Some of the websites you see on the net are more like like cost comparison sites and will give the business the opportunity to compare quotes. These sites will link into half a dozen factoring and invoice discounting companies and as a result you will be bombarded with calls from half a dozen companies. We are not sure how this type of service can be providing best adviser particularly when no one actually speaks with you to discuss your business.

Surely the best type of broker is the one that either has a meaningful conversation with you in order to find out about your business or even better they take time to visit. At XL Business finance we have access to all the finance companies on the cost comparison sites and far more in addition. Following an initial interview or meeting we can pinpoint the two or three most appropriate invoice finance providers. And the good news is that this service is absolutely free. If XL Business Finance makes an introduction to finance company and they take you on board as a customer a fee will be paid by the finance company to ourselves. This fee is in no way loaded to the charges paid by your selves.  ALL invoice discounting and factoring companies pay the same level of fees because the broker market is one of their biggest sources of business. Therefore you can ensure you are getting  totally independent viewpoint

Confidential Factoring Explained

May 20th, 2010

Most business understand invoice discounting and most businesses understand full factoring. However confidential factoring maybe available to businesses that require or would prefer a confidential facility.

At a time when many businesses are still struggling for cash the financial institutions have tightened up their criteria as to who qualifies for confidential invoice discounting. A business would need to be well established and have a profitable trading history. The finance company has far less control with an invoice discounting company because they are unable to verify all the invoices and as such it is potentially open to fraud via fresh air invoicing. Factoring which is just about available to any type of business providing you haven’t previously defrauded a factoring company. The factoring company is able to phone your customers to verify invoices and because they also chase payment on your behalf they have a much greater degree of control.

Confidential factoring however provides a solution that provides a compromise for the business and the funder. With confidential factoring the finance company provides the business with their own dedicated phone line and credit controller. They chase the debt in your business name and if any of your customers call for the credit controller the company will answer in your business name. Any funds collected are paid into a trust  account in your name and as such the finance company can exercise a reasonable amount of control. Hopefully this will give you the confidentiality that your business desires.

This is a relatively new product and as such anyone that has had any experience with confidential factoring we would be very interested to hear your opinions.

Equipment Finance for a new start business

May 19th, 2010

I suppose it is good news that we are continuing to receive business finance enquiries for new start businesses. The most recent one of which is for a £40,000 LCD exhibition screen. The discussion with the directors prompted me to remind oneself of the process required for funding a new business with very little trading history.

Many businesses that we see that have been trading for less than twelve months have had various experiences with the high street banks. In our experience inexperienced account mangers get the customers jumping through hoops promising that the bank will do the deal only to be overruled when the deal goes for credit approval. In our experience it doesn’t matter how good the business plans are unless three years decent trading figures can be produced then it is unlikely that the banks will help.

The good news is that there a number of leasing and hire purchase companies that will lend to newly formed businesses. Hover in the case of our £40k LCD business any finance company will view this as a soft asset with very little security. Most finance companies will advance up to £10k per decent guarantor providing that the guarantor is a home owner, has a reasonable amount of equity in that house and they must also have a clear personal search profile. There are however one or two companies that may take a view on the overall deal an providing funding for the whole project. If that doesn’t work then we are in the territory of second charges on property!

Need a Commercial Mortgage?

May 18th, 2010

We have been approached recently by a number of businesses requiring a commercial mortgage. The advantage of using XL Business Finance is that we have people working for us that have been in very senior commercial positions within banks and know exactly what the banks are looking for in terms of  information and types of deals. These businesses recognize that we can add value to the negotiations and dealing with one point of contact saves valuable time and resources. A Finance Director or Managing Director doesn’t need to waste time having interviews with several different finance companies when  they can pass over the responsibility to someone that knows exactly what the banks will do and what they are looking for in terms of property and clientele.

The problem with the commercial mortgage market is that there is still not enough liquidity within the banks. They are still being very picky and choosy as to what they will do. As with any lender some are more aggressive than others and they all have a slightly different way of looking at things. Therefore any marginal deals that would have been done before the recession may struggle to get through. In addition it is no longer good enough to have a very loan advance compared with the value of the property. Commercial mortgages are at the moment still difficult to obtain with a low loan to value if the rest of deal doesn’t stack. Serviceability must be proven and ideally the tenant must be of a good quality.

As an independent we know exactly who will do what and be able to find you the most appropriate finance company. This service will not cost you a fortune as for easy cases we will take a fee off the finance company. If the deal is more complex we might take an up front fee however the cost of this fee will hopefully be outweighed by the benefit of us arranging the commercial mortgage.

Import Finance

May 17th, 2010

Import Finance enables a business to theoretically import goods and sell them to an end user without having to use any of their own cash. Providing there is a reasonable margin within the deal and the goods have been presold then an import finance facility will dove tail nicely with a factoring or invoice discounting facility.

This type of trade finance facility isn’t readily available from high street banks. A bank will provide a trade facility for a business to import goods however any facility provided will be done so against the strength of the business and profitability . In many circumstances a bank will also want additional security such as a charge over property. A bank type trade facility will only enable the strongest of businesses to obtain funding.

However a specialist trade finance company will proive a seamless facility for most types of businesses to new starts to businesses which maybe have had some trading difficulties. On providing evidence that the goods have been presold funding can be obtained to import these goods. Obviously the finance company will take title during the process. On delivery an invoice will raised to the end user. Either the invoice is paid in full and the trade facility is repaid or the invoice is discounted via a factoring or invoice discounting facility enabling the end user to sell the goods before having to pay for them. Assuming there is more than 20% profit in the transaction the factoring facility or invoice discounting facility will pay 80% of the invoice and hence again pay the trade facility in full.

hire purchase fixed or variable rate?

May 15th, 2010

We have come across a very interesting scenario in the last week or so whereby another broker had bee quoting a very very cheap rate on a hire purchase deal. Not wishing to criticise my fellow broking colleagues I suggested to the customer that maybe  not all is at it should be.

 Most finance companies have the same funding costs and they have the ability to link it to fixed rates or variable rates. At the time of writing this article the cost of fixed funds for most finance companies is around 4.o%. I would suggest that a margin of 2.5-3% would be a fair return giving a nominal rate to the customer of about 6.5-7%. Therefore when a customer was being quoted 5.5% on a hire purchase deal one can only deduce that the broker was about to sign the deal up on a variable rate. Most finance companies on a variable are taking a min base rate of around 3% so this would seem to stack up.

At a time when interest rates are really low it would make sense to go for the slightly more expensive fixed rate because rates are only going to go up but maybe not in the immediate future. At the end of the day it must b the customers choice and as such the customer must be aware as to what he is signing up for. As provision of  hire purchase or finance lease to business users is totally unregulated the end user must be aware that even a written quote may not contain this vital information

 
 
 

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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