Asset finance leasing - XL Business finance

Switching Factoring Company

October 21st, 2009

The ability to release cash against unpaid invoices undoubtedly can have a positive impact on the cash flow of a business. The extra cash can provide the freedom to grow the business and the added value of having someone chase your debts will also provide a massive bonus and a boost to the business. Typically a factoring facility can release up to 90% of your unpaid invoices with the added benefit of credit control.  However if things are not working out how easy or difficult is it to switch factoring companies?

There are so many factoring companies to choose from and not all factoring companies are the same. Some are bank owned, some are independent PLCs and some are small private companies. Which is the best factoring company for you will depend on the turnover, the length of time you have been trading and the profitability for  your business. In addition factoring is very much a value added service. Factoring can provide credit control on the back of the  funding your invoices. As such there are two elements to the charging. An interest rate at around 1-3 over bank base rate is applied to the money you borrow and there is a service fee for the credit control. For the smaller business this starts at a couple of hundrded pounds per month. The cost of using a factoring company for credit control can be very cost effective compared with the cost of employing a full time credit controller.

However as factoring is not as simple as just borrowing money there are occasions when the relationship between the factoring company and business breaks down to the point that the customer has no option but to  seek a new factor. The most difficult part of changing factoring companies is that the charges can be onerous especially if a new contract has been signed. Sometimes with some careful negotiation these amounts can be reduced however it is best timing any move to coincide with the expiry of any contract. It is not unusual for factoring companies to have a 3 months notice period so this must be taken into consideration as well. In addition if you factor with the bank and they have a overdraft as well as a factoring facility the overdraft maybe withdrawn if they are loosing the factoring. A good independent factoring broker may be able to add some value in any transfer as many of us know many of he funders very well and sometimes we can have some influence over the exiting factoring company.

Financing Equipment from a Foreign Supplier

October 20th, 2009

Financing eequipment from a foreign supplier might not be as straightforward as one would think. Strangely however the larger the transaction the easier it is. Different finance companies have different views of what can and cannot be done so it is worth speaking with a good independent finance broker that can guide you though the various options.

There are only a few finance companies that can help with hire purchase or the finance lease of equipment from a foreign supplier. It is always worth trying to get the finance in place well in advance of you actually requiring the facility. As most finance companies will agree a facility for a max of 90 days it is best working out your options no more than three months in advance.

There are two ways of funding equipment in this way. The first is for the customer to purchase the equipment from the foreign supplier. They will have entered into an agency agreement authorising the customer to purchase the quipment on behalf of the finance company. In the terms of the agency agreement it will have been agreed that the finance company will then provide a finance lease agreement or a hire purchase agreement to the customer. Certain finance companies will will only transact these agreements at a certain level because of the  amount of paperwork involved. The other disadvantage is that the customer must be expected to pay for the goods up front. Sometimes if the foreign based supplier  requires paying in advance then this can be the only way to finance plant and machinery supplied by foreign suppliers.

If there is a good relationship with the foreign supplier  you may still have to enter into an agency agreement however it may be possible  for the finance company to pay the foreign supplier direct. For this to happen the goods must have landed on the UK so the finance company can inspect the goods.  It may even be possible to structure a deal so no VAT is paid to the finance company. This only works with non UK invoices. Give us  a call to find out!

Invoice Discounting

October 19th, 2009

Invoice discounting is simply the means of raising cash against unpaid invoices. Choosing the right finance company can provide the financial freedom to grow the business or  in these difficult times it can implybe the difference between survival and failure. Not all invoice discounting companies are the same and it is important to choose the best finance company for your particular requirements.

Bank owned invoice discounting companies are very good at looking after their own customers providing the business is financially strong. If there is a strong bank connection with other facilities such as commercial mortgages and /or overdraft facilities the banks will bend over back wards to ensure they get the business.  It is still possible to get some very cheap invoice discounting deals on this basis. Be  beware that if you expose your business too much to one  financial institution you might be storing up trouble for the future. No one could foresee the creditt crunch however in hind sight it easy to say we should have seen what was coming. It is exactly the same with finance facilities. Let the bank have too much control and if things turn for the worse any business with too much financial exposure to one bank may find themselves in difficulties.

An independent invoice discounting company will ensure that any risk is spread across a number of finance companies and that you don’t have too many eggs in one basket. There are plenty of invoice discounting companies glad to take on the invoice discounting  on a stand alone basis and they wont be interested in taking over the core banking.  However if you do choose to use a third party factoring company it is worth checking if the bank isrelying on the debtors for security on any of their facilities. If the business has an overdraft it may be possible the bank have registered a debenture against the business. Therefore if you are to switch to an invoice discounting facility any overdraft maybe withdrawn and this must be taken into consideration with choosing a provider.

Factoring for a small Business

October 16th, 2009

There are literally dozens of factoring companies, some bank owned and many others are independent. A well run factoring facility can provide a cash lifeline by providing funding against unpaid invoices. The ability to unlock this cash provides the financial freedom that a business requires to develop and grow. However in these difficult times the choosing the wrong factoring company can be the difference between a business succeeding or failing. It is even more important for the small business because the wrong choice of factoring company can potentially lead to devastating consequences. So how do you select the best factoring company?

Most businesses with turnover of less than £500,000 will be required to factor their debts. Factoring not only provides cash against unpaid invoices it also provides a credit control system for the business. There are two elements to the charge. The cost of borrowing the money which is usually charged at a percentage over bank base rate or libor and a service fee which is usually a percentage of turnover. Depending on the complexity of the business ,the number of invoices and turnover the service fee can start a a couple of hundred pounds a month or from 0.5% -2% of the total turnover.

Not all factoring companies are the same. Factoring is very much a service driven product and some providers are better than others.  Other than providing cash sometimes we forget that if the credit control of the factoring company is not up to scratch than there is no point  choosing the cheapest provider if they cannot collect the cash. At XL Business Finance we know which factoring companies will telephone all your customers ensuring the cash is collected on time. Many of the bank operated factoring companies will only telephone the top few debtors leaving the rest to be chased by post. Also the number of customers will also impact on service. The geographical location must also be taken into consideration as certain factoring companies are better in certain parts of the country. A good independent factoring broker will be able to guide you through the factoring maize.

Business Financing

October 13th, 2009

XL Business Finance can provide a fresh outlook to business financing. Whilst we cannot guarantee every business will have success in obtaining the required amount of funding we believe that if finance is available we will find  a finance company to meet your particular needs. In addition we believe that for every high street bank product there is an independent finance company providing an  alternative. We are not saying that all independents are better than banks. In certain circumstances we do recommend bank products however it is a case ogf knowing what is available so  we have to look at each individual case on its own particular merits.

We believe that any business should spread their finance requirements via various funders. For example this week we have visited a manufacturing business with turnover of approx £1.0m. The business banked with Abbey National which incidentally provide free banking for just running an account. The business had a £20k overdraft facility which against  turnover of £1.0m wasn’t really enough. The Finance Director who had come from an accounting background still wrongly believed that there is a stigma attached to factoring and invoice discounting which in our opinion couldn’t be further from the truth. They believed that they should be moving to a larger high street bank to obtain an increase in working capital facilities.

Moving to a new bank and obtain a packaged deal on funding arrangements can cause major problems. One bank providing invoice discounting or factoring some  equipment finance and possibly a small overdraft has too much control over the business. We have seen and heard instances where a customer has gone bust. The invoice discounting side to the bank inform the branch that there might be a problem and the relationship manager withdraws the overdraft. The result is another business going bust.

Our advice is to spread it around as much as possible. Use one bank to provide a clearing facility, use another financial company to provide your invoice discounting or factoring and use another to provide hire purchase nad leasing for  capital expenditure requirements. This by far the best way of safeguarding you from the banks!

Banking in a recession

October 12th, 2009

The recent publicised report stating that intrest rates will stay at 0.5% until 2011 and will remain below 2.0% until 2014 suggests that recovery from this recession will be longer than expected. In terms of the banks attitude to risk and lending I think we can see a protracted inflexible and cautious stance on lending for many years to come.

It is easy to blame the banks for the mess we are in but personally I think we as individuals are all as much to blame as is the government. The banks are indeed  to blame for their lax lending policies of recent years. As a finance broker we saw many business finance deals agreed by the banks at very low interest rates  and at amounts which in our opinion were too high for the businesses concerned. The banks had lost sight that lending money is a risk reward business. As individuals we are to blame for our materialistic and must have now and pay later attitude. Is it correct that the average house hold has over £20k of credit card debt? No wonder there ae so many personal bankruptcies at the moment. And the government must be partially to blame for not regulating the whole thing in the first place.e

The bottom line is the banks have had their fingers burnt. They ain’t suddenly going to start landing like the good old days. Thankfully there are many independent finance companies willing and able to add value and help where the banks cannot.

Invoice Finance

October 7th, 2009

Invoice Finance is simply the means of releasing cash against unpaid invoices. Invoice finance takes place in a variety of forms and can include invoice discounting, confidential invoice discounting, factoring, confidential factoring and trade finance. Which ever facility best suits your specific requirements the ability to release additional cash can certainly help a business with their cash flow.

Invoice discounting is simply the means to raise cash against unpaid invoices. It is normally offered on an undisclosed basis. As your customers will be unaware that you discounting your invoices  it is more susceptible to abuse and as such it suits businesses which are financially strong, reputable  and long established. In the current economic climate it is more difficult to get an invoice discounting facility for marginal customers. Costings for such facilities are comparable to a bank overdraft with a a charge over base for borrowing the money plus a small monthly service fee for operating the facility.

As factoring is done on a disclosed basis and your customers will be asked to make payment to the factoring company from the finance companies point of view the product is less risky and as such just about most businesses can obtain a factoring facility. In addition factoring comes with credit control whereby the finance company will chase your debts. This really does add value to product and as such you don’t always get what you pay for. Independent factoring companies tend to be be more proactive than banks factoring companies and as such there may be slight variations in costings.

Restructuring Finance

October 6th, 2009

Many businesses are struggling for cash flow in the current  difficult trading conditions. The ability to ease the monthly debt burden is a top priority of many finance and  managing directors. Thankfully there are many ways XL Business Finance can assist to ease the pressure.

The biggest problem is the ability to collect cash from customers who themselves struggling for liquidity. Combined with the reduction of credit limits this can produce a double whammy in terms of having a negative affect on cash flow. Not all factoring and invoice discounting companies are the same. Far from it. XL Business Finance has helped many businesses choose the correct factoring or invoice discounting company for their particular needs. In addition we have help plenty of businesses switch to a more flexible factoring company.

Another way we can add value is to look at the monthly hire purchase and leasing payments. It might be possible to restructure these payments for a cheaper monthly outgoing. And if there is enough value in the equipment it may even be possible to release cash from the  equity from within the machinery. It must be pointed out that refinancing existing machinery is sometimes at a premium in terms of interest rate and as such we can provide honest and impartial advice as to whether this route will work or not.

Why use a Factoring Broker

September 29th, 2009

XL Business Finance is one of the UK’s leading independent factoring company. We save our clients time and money choosing the right finance company. The good news is as well is that our service is totally free.

There are literally dozens of UK based factoring and invoice discounting companies so how can you be sure the finance company you choose is the best one to suit your particular needs? During our initial free consultation with our customers we can quickly determine which two or three finance companies will be best suited to our customers. WE use our 10 years experience within the industry and base our decision on the age of a business, its turnover, how profitable the business is or is not, and whether there are any other unique requirements within the facility required. For example there are only one or two finance companies that will fund contractual debt and construction companies. Whether there is any international trade or importing and exporting will also have an influence on the decision.

Therefore we use our experience to make one or two recommendations and we believe that this saves our customers considerable time and expense. Although we don’t charge our clients we will get an introductory commission from the finance company.  All factoring companies pay commission so we are not loyal to any one lender. We have to add value to our service and make the best possible recommendations otherwise we don’t get paid!

Trade Finance

September 28th, 2009

Trade Finance provides customers the ability to import goods either from the UK or domestically. If the facility is provided in conjunction with an invoice discounting facility a complete funding solution is provided from start to finish.

For example if a business is importing television sets from China a trade facility would provide a facility to import the goods. Providing the televisions had been pre sold it is possible to get 100% funding.  The trade facility would be repaid when the goods are imported and sold in the UK and an invoice is raised to the UK purchaser. When the invoice is raised to the UK buyer  either an invoice discounting or factoring facility  will repay the trade facility. It can be seen the trade facility and the invoice discounting facility dove tail nicely together to provide a total funding solution.

This type of trade facility is more likely to be provided by an independent invoice discounting company that will take a more flexible and commercial view. Therefore as long as the end purchaser in the UK is verified an reliable the funders know there exit route and as such will be more likely to fund new start businesses, poorly trading businesses and businesses unable to raise finance by their own banks.

 
 
 

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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