Asset finance leasing - XL Business finance

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.

Vehicle Finance

September 25th, 2009

There has been a recent increase of customers wishing to replace commercial vehicles.  There are many different ways of providing vehicle finance and which option is best  depends on the circumstances of each business. In additionthe dramatic change in fortunes of many businesses and indeed finance companies has dramatically changed how vehicles can be financed.

 Weare seeing many businesses coming off contract hire deals and needing to replace vehicles passed their best. The problem is that the funders are very difficult when it comes to agreeing contract hire deals. If there have been any trading issues or  changes in circumstances contract is not the easiest form of finance to get approved.

XL Business Finance however has sourced a number of commercial vehicles recently at much bigger discounts than if the customer had just walked in off the street. This is because we deal a multi franchise car and commercial vehicles supplier which deals with all the contract hire companies. The savings are potentially massive. We tend to put these vehicles straight onto a hire purchase or finance lease agreement and the monthly payment is often not much higher than they would have been paying on a normal contract hire deal. In addition the vehicle which becomes the property of the business at the end of the agreement can be used for a further payment without any additional cost or can be used in a deposit in your next deal.

Cash is King

September 24th, 2009

Indeed it is. The biggest problem our customers are having at the moment is inflexible factoring or invoice discounting companies, unsupportive banks and collecting cash. These all combined together can potentially have disastrous consequences for any business.  However with some careful planning any potential  cash flow problems can certainly be minimised.

Firstly if there is to be any capital expenditure, where possible this should be purchased via a hire purchase or finance lease facility. In addition it is always advisable to use a third party finance company. If you use your own bank you are potentially utilising finance lines which may be required for non asset investments. Never never buy assets for cash even if cash flow is sufficient. If there is an increase in working capital requirement the cash will be required for cash flow. Also it is so much harder to organise fiance a few months down the line. Finance companies will view this as  refinancing existing equipment exercise, there are far less funders and rates will be much higher.

It also wise to choose your invoice discounting or factoring company wisely I was with one customer this week who regretted going with a main bank. He wished he had gone for the slightly more expensive independent as he would have been certain to have had more cash. In retrospect hindsight is a wonderful thing!

Need an Overdraft?

September 23rd, 2009

We continue to hear horror stories about businesses having their overdrafts pulled by the bank. For years we have been advising customers to avoid bank overdrafts at all costs. Overdrafts are repayable on demand and the banks can and will demand repayment at a moments notice.

I was with an insolvency practitioner yesterday whom had witnessed one of the worst examples of an overdraft being pulled by a high street bank. The customer had a £800k overdraft which was secured against a personal property which had approx £450k equity. The bank gave the customer 6 months to reduce the overdraft by £400k. The customer did so by increasing terms with creditors, cutting staff and organising an arrangement with the inland revenue for Paye and tax arrears. As soon as the overdraft was down at £400k the customer was called into the bank the overdraft was officially withdrawn, the business went bust, his house was repossessed and the owner /managing director was made bankrupt. Now I know this sounds a bit harsh and there are two sides to every story but these kind of scenarios can often be avoided.

If possible using a factoring or invoice discounting is always more advisable than using a bank overdraft. The facility can often provide more cash than an overdraft, it isn’t repayable on demand and it will grow with the business. Secondly where possible always use a hire purchase or leasing facility to purchase capital equipment. These are stand alone finance products and are again are not repayable on demand. Remember cash is king!!!!!!


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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