Asset finance leasing - XL Business finance

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

International Trade Finance Explained

May 14th, 2010

There are a  number of ways that specialist trade finance companies can help your business. In many cases a complete funding solution is available which might not be available from the banks. A business that has a requirement to import goods maybe able to obtain funding providing that they have confirmed orders for their goods.

For example if a wholesaler is importing televisions but doesn’t have the cash to buy the televisions from the foreign supplier and provided the wholesaler has orders for the TVs in the UK a complete funding package will be available. An import facility is provided for the wholesaler to import the TVs. As soon as they hit the UK and are dlivered to the end customer an invoice is raised as per usual providing however many days credit. The wholesaler will then factor that invoice with the same finance company to repay the trade element of the facility providing a dovetailed finance solution.

This is slightly different from how the banks work that don’t look to be repaid from a factoring or invoice discounting facility but from the sale of the goods at some point in the future. The banks way of doing things is slightly more risky and as such they will look to support business that are only profitable, with a strong trading history and a proven track record.

The dovetailed solution poses a less of a risk to a finance company as they keep control of the transaction from start to finish. Although these facilities may be more expensive than a bank they enable businesses that have no track record or are even new starts or have very little cash to obtain import finance.

How to transfer existing leasing agreements in event of an administartion

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

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

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

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

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

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.

 
 
 

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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XL Business Finance, Eaton Place Business Centre, 114 Washway Road, Sale, Cheshire M33 7RF UK.

 

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