Asset finance leasing - XL Business finance

invoice finance or overdraft

January 15th, 2010

Without a doubt we would recommend invoice finance over a bank overdraft any day of the week. There are obviously exceptions of course. Invoice finance provides 80% of your unpaid invoices as soon as you have raised your invoice. It provides a flexible approach to your working capital requirements. Obviously this wont work if you are getting cash on delivery or on the point of sale. Uner these circumstances you would need an overdraft facility to provide you with adequate working capital.

There are many advantages to invoice finance compared with a bank overdraft. Overdrafts are normally secured aginst property and are fixed at a set amount with little scope for increasing as your business grows. More importantly it should be noted that a bank overdraft is repayable on demand. If your business takes a turn for the worse potentially the overdraft can be withdrawn without notice. Unfortunately in the current economic climate we have seen happen all too often. This will never happen with an invoice finance facility.

Invoice finance can be provided by way of a number of products. Factoring in addition to providing cash against unpaid invoices provides a credit control facility. Invoice discounting can be provided on a confidential basis and as such only provides a working capital facility. Invoice discounting is suitable for more established businesses who will have their own credit control facilities in place. Different finance companies provide slight variations on these two products but in main these are the two most common invoice finance products.

A quick search on google will reveal hundreds of potential finance companies. Banks are good at invoice discounting however there are independent companies that are capable of providing an equally acceptance product. As a rule of thumb independents are better at providing factoring products. XL Business Finance can help you find the most appropriate finance company.

Is it Possible to get overpayments with invoice factoring

January 14th, 2010

Invoice factoring provides cash against unpaid invoices. Most finance companies will pay up to 80% of unpaid invoices and give you credit of up to 90 days. Before the credit crunch it may have been possible to obtain up to 90% of your  sales ledger however this is very uncommon in the the era of  very cautionary finance companies. When choosing an invoice factoring company it is important to take into consideration how flexible they may or may not be.

 Imagine coming to the month end and there are not quite enough invoices in the pipeline to draw down enough cash to pay the wages. However you have a few big  jobs around the corner and you know you will catch up the following week. If you are with a bank based factoring or invoice discounting company and you need a bit of extra cash then good luck trying to find a decision maker. If you have chosen a smaller and sometimes independent factoring company you will have a much greater chance of getting an overpayment. At XL Business Finance we do have clients who have moved to bank based factoring companies and have moved back to smaller independent for this very reason. They know at the end of the month that if here are going to be any short term cash flow problems they need a flexible finance company that they know that after one phone call and no more than 24 hours later they have some extra cash.

An independent factoring company is one that is not bank owned and therefore does not have the same red tape and bureaucratic hierarchy to go through to get decision done. They have usually been set up by quality guys that have been within the factoring and invoice discounting industry for many years. The MD will sit in the same office as all the other staff so special requests and help can be obtained by walking straight into his or her office.

Factoring a new start business

January 13th, 2010

Arranging factoring finance for a new start business should be relatively straight forward however not all factoring companies are the same so it is imperative that if you are starting a new business that you choose the correct type of finance company for your specific requirements. A well run factoring service will release up to 80% of your unpaid invoices and provide you with much needed working capital.  

The most important aspect of a new start business is to get a proper level of funding and that the finance company collect your debt as quickly as possible. It is important that you are never more than one or two phone calls away from a decision maker. XL Business Finance has been helping clients choose the most appropriate invoice factoring company for many years and as such we have added value to many new start businesses.

As a rule we would not recommend a bank for factoring although there are instances when we would. One bank in particular is quite good at financing  contractual debt and another is quite good at financing foreign debt. Typically an independent based factoring company provide a much better service than a bank based factoring company. Most independent s will telephone all your customers whereas a bank might only phone the top 3 customers

It is also worth finding out where your account will be run from as there is no point in dealing with a factoring company at the other end of the country when there could be an excellent finance company located within a few miles. We will take into consideration other factors when helping you choose the most appropriate finance company.

The quality of your sales ledger, the number and concentration levels will all help to make a recommendation. It will not take long to do an assessment of your business and we will give you a few funders to have a look at . This service is free!

Can I refinance Plant and machiery

January 12th, 2010

The good news is thatachinery it is possible to refinance plant and machinery. The even better news is that it is possible to refinance plant and machinery just about for any purpose. There are still many asset based lenders proactively growing their books in the current financial market. This is a stark contrast to the bank owned balance sheet finance companies that seem to still tucked up in their shells. XL Business Finance has been at the forefront of asset based lending for over 10 years and we are one of the UK’s leading experts when it comes to the refinance of plant and machinery.

Refinancing of plant and machinery is a very very specialist market and as a rule non of the high street lenders operate in this market.  An asset lender will advance an amount against the value of the plant and machinery and depending upon which finance company you go to there might be a large valuation in their perceived valuations. As an independent finance company ,  XL Business Finance we know exactly which finance companies are best at financing what sort of asset. For example some finance companies are good at financing printing equipment and their are others that are experts in financing haulage equipment. It is important to get a broker which knows this market well as it will save you a great deal of time and effort going around the houses.

Any offer of finance will be based on a percentage of the trade value or forced sale value (FSV). A typical deal may be based on a eightypercent advance. Unfortunately there is a big difference between trade and retail values in the current climate.  An asset based lender can only advance aginst a worse case scenario and good equipment is being sold very cheaply in forced sale situations at auction. This is obviously affecting valuations when it comes to refinancing plant and machinery.

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

January 10th, 2010

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.

Business Finance from asset based lenders

January 9th, 2010

Business Finance covers a great number  of financial products many of which can be provided by independent finance companies as opposed to bank based lending. We would suggest that organising business finance has a great deal of benefits when using independentbased lenders. In the current economic climate it is advisable to spread as many types of lending with as many different lenders as possible. Never has it been more prudent not to have all your eggs in one basket. Fundng from asset based lenders is still relatively abundant therefore in theory it should be easier to be less reliant of the banks.

At XL Business Finance we would recommended that if possible you should only use your bank as a clearing facility. An invoice discounting or factoring facility is preferable to a bank overdraft. Invoice finance grows with the business  whereas a overdraft which is repayable on demand will often be fixed at a set amount which depends on the level of security available. An overdraft amount is nearly always never enough.

Also there is absolutely no reason why you should need to have a commercial mortgage with your own bank. There are a number of specialist commercial mortgage institutions offering excellent deals. keep your commercial mortgage separate from your own bank to prevent the bank having too much control, on your businesses finances.

Equipment finance by way of hire purchase and leasing can easily be arranged via third party leasing companies. Again using a different finance company will prevent having too many eggs in one basket.

XL Business Finance has been helping many businesses for over 10 years to obtain the most flexible and competitive funding available in the market place. We understand how to structure a proposal and what information the finance companies require resulting in a very high conversion of our applications.

Need to arrange equipment finance?

January 8th, 2010

There are two very  different types of finance companies when it comes to arrange equipment or asset finance. There are balance sheet lenders and there are asset lenders. They approach things in completely different ways.

 Balance sheet lenders are typically your banks and high street finance companies. They are more interested in how long a business has been trading, how strong the balance sheet is, how profitable a business is and without a doubt you must be able to evidence serviceability. They are looking for businesses trading f0r more than 3 years without any blemishes on their trading history. If there are any county court judgements finance will tend to be declined. If your investment is £100k for example they will expect to see a net worth of at least that amount.  If your business is strong enough for balance sheet lending you can expect to obtain very favourable interest rates and excellent terms for hire purchase and finance lease transactions.

The problem is that the high street lenders are being very picky about who they will lend money to. A business which could have obtained funding from a bank 18 months ago may find that they are given the cold shoulder at the moment. It is a combination of banks tightening up their underwriting criteria combined with a lack of cash in the market which has caused basic economics of supply and demand to kick in.

The alternative are the asset lenders. These finance companies are specialist finance companies that will value equipment and lend a percentage of their perceived forced sale value. Therefore a new machine costing £100k may only have a day one forced sale value of £60k which might mean they will only advance £50k against that piece of equipment. The remaining deposit would therefore need to be found by using additional equipment to provide a more secure transaction. XL Business Finance has been providing funding solutions for over 10 years.

how to choose an invoice financing company

January 7th, 2010

Invoice financing is a form of cash flow finance which can release up to 90 % of your unpaid invoices. It can take form in a variety of different variations. There are basically 3 0r 4 core products and the 50 or so finance companies offering invoice financing provide slight variation on each of the  core products. Invoice financing can take form as factoring , invoice discounting , confidential invoice discounting and confidential factoring. Invoice finance has beenone of the fastest growing areas of finance in recent years and even in the current economic climate and credit crunch there are still many finance companies offering such products. At one time invoice finance was seen as a lend of last resort. This stigma has just about disappeared especially when you consider the risk of using a bank overdraft which have always been repyable on demand. Invoice financing will provide a more secure form of funding that potentially can grow as your business does. XL Business Finance has been helping and advising businesses for nearly ten years and placing them with the most appropraite finance company.

Which finance company is best for you depends upon a number of different factors. Firstly do you require factoring or invoice discounting. The finance companies which are good at factoring are not necessarily the best at invoice discounting and visa versa. Factoring as much as providing cash flow is also about credit control and providing a debt collection service. Certain finance companies are geared up to chase customers debtors better than others. Also your geographic location must be a consideration. There are a number of smaller privately owned factoring companies dotted around the country.  These finance companies can provide a most excellent service however they tend to stick to reasonably locall based companies. There might be one of these companies close to you. It is worth getting us to check it out for you.

Invoice Discounting Charges Explained

January 6th, 2010

Invoice discounting is the ability to raise up to 85-90% of a businesses unpaid invoices. There are approximately fifty or so providers based in the UK all offering a similar service. As explained in other posts not all finance companies are the same and as such great care should be taken when choosing a finance company. Most invoice discounting facilities can be run on line and at the end of the day the client will send a copy of their sales day book to the discounter. The discounter will then make available 85% of the invoices available for draw down by the client. The client runs the sales ledger and collection and makes telephone calls to chase the debt. The client collects payments from their customer and pays the money into a trust account. The discounter collects the funds from the trust account and pays back the remaining fiftenn percent less the charges for running the facility.

There are two main charges in invoice discounting agreements. The service fee is a percentage of the clients turnover for the privilege of operating the facility. These costs can vary between 0.1% -1% of turnover depending on the circumstances of the facility. The second charge is the cost of borrowing the money which is an interest charge for the priveledge of borrowing the money. Charges are usually 1-2.5% over the cost of borrowing. Some providers will link to bank base rate and others will link to LIBOR, which at times can be completely different. In addition some invoice discounting companies will charge a minimum base rate and as such the headline interest rate must be viewed with an air of caution.

If base rates  are low as they are now and we are expecting rates to go up a lower add on rate with a higher minimum may be better tan a ower min but with a higher add on.

Need Factoring Advice?

January 5th, 2010

January is one of the busiest months for businesses thinking of looking at invoice  factoring . After the Christmas break many businesses find them selves strapped for cash and as such enquiries for this form of finance sky rocket. The good news is that you don’t have to go to your clearing bank for these very flexible cash flow facilities. There are many independent based factoring and invoice discounting companies based throughout the UK who in our opinion provide a much more comprehensive funding package. Whether you are looking to raise cash against unpaid invoices or you need help with collecting your debtor book XL Business Finance will be able to help you find the most suitable funding partner.

AT XL Business Finance we deal with the vast majority of the UK based factoring companies. We know which finance company is best for your particular business. There are literally dozens of UK Based factoring companies offering up to 90% funding against your unpaid invoices. The thing is though that not all of them are the same. Like with any financial institution they all have their sweet spot and each and every finance company has their own particular sweet spot! How can you be sure that unless you use an independent  factoring broker that you are finding the company with the sweet spot that matches y9our own particular and unique requirements?

What is the point of factoring your invoices with a company that the Head Office is based in London and you are based in Manchester. If you have any issues surely it is better that you can drive a few miles down the road and have a face to face chat with a decision maker! Additionally you might want to ask if the factoring company  you are dealing with has credit control and collections based in the same office. Not all do!

 
 
 

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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