Asset finance leasing - XL Business finance

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!!!!!!

Cash Flow Finance

September 22nd, 2009

Cash Flow Finance covers so many financial products and provides the ability for the business to raise additional working capital. Factoring and invoice discounting are the two obvious and well known products however stocking finance, trade finance, payroll finance and even refinancing existing eequipment can provide much needed working capital.

Stocking finance is usually bolted into the back of an invoice discounting facility and can provide much needed additional cash. Trade finance is offered by most high street banks however some of the larger independents are pretty good at this facility. Trade finance provides a customer with working capital against pre ordered goods enabling them to purchase stock from their supplier. Trade finance can either be UK based or if a customer is importing goods then we are looking at International Trade Finance. Simple!

Currently no one is offering payroll finance however it is rumoured that a new funder will soon be entering the market so watch this space.

Refinancing existing eeequipment is increasing becoming more difficult  as residuals values of equipment take a pounding in the current recession. However if there is equity in the equipment or machinery this can be released to provide much needed working capital. The equipment or machinery that is to be refinanced need not be free of finance as it may be possible to repay the existing funder, reduce the monthly payment and also release some cash back into the business. Happy days!

Invoice Finance

September 21st, 2009

Businesses wishing to free up cash against unpaid invoices can use Invoice Finance as a means of assisting with cashflow. There are various forms of invoice finance  and which form of finance is best for you  depends on a various circumstances. A good factoring broker will be able to assist with choosing the right company.

Confidential invoice discounting is best suited for businesses which are well established and have a proven track record of being able to collect their invoices. Adequate systems must be in place and any finance company can make an offer subject to an audit. One of our complaints as a broker is  that we see offers  which in reality we know will not come to fruition. We know exactly which finance companies are able to deliver and which ones will fort short on their promises.

A traditional invoice discounting facility will enable a business to submit invoices and they are able to draw cash immediately. It is very much a trust thing going on and as such a business must be well established and trading profitably.  Some finance companies behind the scenes  will  run a mirror ledger unbeknown to their customer to ensure that nothing untoward is going on. Not all finance companies will do this explaining why some finance companies are happy to offer confidential invoice discounting and some finance companies are not.

Invoice Discounting

September 18th, 2009

Although invoice discounting is a great means of freeing up cash against unpaid invoices it is becoming increasingly more difficult to secure an confidential invoice discounting facility. Once upon a time a business had to have been trading for at least 3 years , have at least a £1.0m turnover and have a very strong balance sheet.

In the good old days when there was plenty of cash swilling around the system  all the finance companies were competing with each other for business and it is fair to say that the usual criteria for confidential invoice discounting were relaxed somewhat.  New start businesses, phoenix businesses and  businesses with far from strong trading performances were being offered facilities.

Invoice discounting and in particular confidential invoice discounting is susceptible to fraud and in these difficult times finance companies are reverting back to the more stringent criteria for invoice discounting. Therefore if a business is financially weak, turnover is below a certain level or even credit control systems are weak it is more likely that a business will pushed down the factoring route.

If the business doesn’t quite meet the criteria for confidential invoice discounting it maybe possible to organise a disclosed facility whereby the customer is is responsible for their own credit control. Which ever way you decide to o it is worth shopping around as different finance companies have different criteria. Even better get a decent independent finance broker to do all the hard work.

asset finance leasing

September 16th, 2009

Asset finance leasing is becoming increasingly more difficult to organise. With the exit of Lombard and Hitachi from the broker market there are only a few funders remaining in the market place. Many high street banks have their own asset finance division but they tend to do only the bigger deals over £50,000 for their own customers. If the deal is for under £50,000 they will potentially push the customer down the loan route.

The problem with this is that it could restrict a businesses ability to organise future non asset based lending.  What is the point of utilising  valuable credit lines and funding asset purchase via loans instead of using a third party funder to provide a hire purchase or finance lease facility. In our opinion any capital expenditure is best suited to a hire purchase or finance lease facility which will leave the bank credit lines available for a rainy day.

We say it time and time again. Use the bank for clearing facilities, an independent for your factoring and invoice discounting. Remember if you need an overdraft it wont grow with the business like factoring and invoice discounting and any overdraft is potentially repayable on demand. Using a third party leasing company will ensure that you don’t have too many eggs in one basket and you are not exposed too much to any one financial institution.

There are still third party finance companies open for business. Getting deals agreed isn’t as easier as it was 18 months ago however a good independent finance broker will be able to guide you through the pros and cons of the different finance companies.

Business Financing

September 15th, 2009

There are certainly many forms of business financing. Traditionally one would go to their own banks for a particular form of business finance. Banks can and will offer a whole one stop shop of finance solutions. But how do you know you are getting value for money and the best possible service within the market place. Undoubtedly certain banks have areas of expertise and we will always give credit where credit is due.  However  our complaint is that banks try be everything to everyone and quite frankly that doesn’t work.

In addition it is very dangerous to have all your borrowing facilities with one financial institution. We have recently seen an instance recently where the bank had provided an overdraft and invoice discounting and a commercial mortgage.  Unfortunately one of customers debtors went bust, the invoice discounting part of the bank informed the relationship manager  who then pulled the overdraft and the company went into administration. This would never have happened if the the customer had used an independent factoring or invoice discounting company.

It is very much our opinion that as many different finance products should be spread around as many different finance companies as possible. Whilst certain banks have a good expertise in certain areas i guarantee we could find an independent funder that can provide a far superior service without half as much hassle

Invoice Finance

September 14th, 2009

Invoice finance is simply the means of releasing cash against unpaid invoices. Typically 80% of the invoice is paid upfront by the invoice finance company. On payment of the invoice by your customer ( typically after 90 days)  the remaining 20% is paid to  you less any charges due to the invoice finance company.

An invoice finance facility will unlock cash and assist with a businesses cash flow. Unlike an overdraft facility which is fixed at  a certain amount invoice finance will grow as a business expands . In addition an overdraft facility is repayable on demand and so there is always the risk it could be withdrawn. In recent months we have certainly seen this happen as bankers continue to be nervous and unsupportive in these difficult times. The security that banks require to agree an invoice discouning facility also tends to be more onerous with property often required to secure a facility. An invoice finance facility relies on the unpaid invoices as security. 

Typically a factoring faciltiy  is provided on a disclosed basis and offers a full credit control service. Confidential invoice discounting is normally on an undisclosed  or confidential basis and is just a means of providing cash flow because credit control is kept in house. There are many variations offered by numerous invoice finance facilities and different finance companies have different niche products and attributes. A good invoice discounting broker will be able to advise as to  which funder will be best for your particular needs.

Lombard and Hitachi exit Broker Market

September 13th, 2009

Last week Lombard finally closed their doors on the broker market. A few days later Hitachi followed suit. Rumour of Lombard exiting the broker market came as no great surprise however I don’t think anyone expected Hitachi to exit as well. Only a few months ago Lombard had significantly reduced the number of brokers they were dealing with and rumours of significant losses in the sector  there was only going to be one outcome.

This is still bad news for the market with the exit of  the UKs largest leasing company. There will be even less choice of funders in the market place and the ones that remain wull potentially increase their rates and be even more choosy  with whom they will do business. It is simple economics of supply and demand. The good news that there are still one or two funders remaining that are still open for business. A good independent finance broker will certainly  be able to add value and will still be able to structure a deal with the lessor known leasing companies.

Whilst funds remain tight deals will be done on the funders terms. Customers can expect higher deposits, shorter terms and the need to provide more security  such as personal guarantees. The good news is that there are rumours of a couple of foreign banks looking at entering the UK leasing market. Still tough times ahead I am afraid.

 
 
 

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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