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How to choose an invoice financing company

Friday, January 29th, 2010

Ok so we have established over the last few blogs that as the UK emerges out of the recession that using banks for working capital funding and in particular bank overdrafts is probably not the best form of finance. However there are so many invoice financing companies available how do you know which one will suit your particular business and who will give you the best deal. There are many factors that should be taken into consideration when choosing a provider. First there is a big difference between invoice discounting companies and factoring companies. The finance companies that are good at factoring are not always good at invoice discounting and visa versa.

Although both financeproducts will release cash against unpaid invoices of up to 80% factoring is more more of a service orientated product providing credit control as an added benefit. The idea is that you outsource this to the factoring company who will chase your customers and make sure the cash comes back to the business in a timely fashion. The cost of the factoring service is minimal compared with employing a full time credit controller. However with factoring cheapest is not always best. Although there isn’t a massive amount of difference between costs you do tend to get what you pay for. If you pay peanuts for a facility you will probably get monkeys chasing your customers if they can be bothered at all.

The service aspect is less important when it comes to invoice discounting however the bigger the financial institution the further you are away from a decision maker there if you need some flexibility a smaller company can provide quicker turnarounds. Confidential invoice discounting as it suggests is kept secret from your customers and it provides a working capital facility that unlike a bank overdraft grows with your business.

New start business and confidential invoice discounting

Tuesday, January 19th, 2010

It is now possible for certain new start businesses to offered full confidential invoice discounting. As we know confidential invoice discounting will release up to 85% of any unpaid invoices. As invoice finance can grow with the business it is much more preferable than any bank overdraft which tends to stay at a fixed level. In addition a bank overdraft is repayable at any time therefore invoice discounting provides a much safer option in terms of stability.

Traditionally confidential invoice discounting was for businesses with turnover in excess of £1.0m however before the credit crunch many different invoice discounting were offering confidential facilities for businesses who wouldn’t normally meet the standard criteria for such a facility. Along comes the credit crunch and all of a sudden it is like going back 10 years and all you can get is factoring. From the finance company point of view factoring is allot safer product because they are able to verify the debt by phoning your customers.  This can cause a problem for certain customers firstly because they don’t like the finance companies calling their customers ( not all of them are very subtle) and secondly you may already have an adequate credit control facility in place and as such factoring could become unnecessarily expensive.

However it has become apparent that a number of the the more independent invoice discounting companies are once again beginning o relax their criteria and as such it is again possible to obtain invoice discounting whereas last year you may have only been offered factoring. This is again the case with new start businesses. So long as the directors have had experience within that sector, adequate systems and procedures will be put in place invoice discounting with certain finance companies is definitely an option. XL Business Finance has been helping and advising customer for over 10 years in such matter.

Confidential Factoring or Confidential invoice discounting?

Monday, January 18th, 2010

The advantages of being able to release up to 90% of your unpaid invoices is obvious however many business are still put off invoice finance not because they think there is still a stigma surrounding the facility but because their customers will not allow it. Therefore a traditional factoring facility is unacceptable because the finance company will need to verify most of your invoices. A traditional invoice discounting facility is normally only available to long established and profitable businesses. Therefore a good chunk of businesses may find themselves caught between a rock and a hard stone. The good news help is hand and XL Business finance has access to a number of finance compasnies and creative finance products that could fill a few gaps in the market.

Many businesses will not be eligible for confidential invoice discounting because they haven’t been trading long enough, turnover isn’t big enough, they are not profitable enough,  they have gone through a prepacked administration or their existing factoring company has given them notice for breach of the facilities. From the finance companies point of few confidential invoice discounting is far more risky because it is not always possible to verify the debt and is therefore more open to fraudulent activity.

However one finance company XL business Finance deals with are prepared to give customers that don’t meet the normal criteria on invoice discounting providing a facility provided there a good systems in place. From a management point of view invoice discounting is less time consuming and potentially more profitable. For the first six months or so they may run a shadow ledger to make sure the facility is being run properly.

Confidential factoring provided by a different finance company is a half way house. You will be given your own dedicated credit controller who operates in the name of your business to ensure all the invoices are collected in the normal way. You will also be your own telephone number providing all the advantages of a full factoring facility with the confidentiality certain businesses require.

 

 

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Confidential Factoring

Monday, October 26th, 2009

The ability to release 90% of unpaid invoices before they are due can provide a massive cash flow benefit to any business.  However for many businesses  it is important to obtain a  degree of confidentiality to maintain a good client rapport. Traditionally confidential invoice discounting would have been the chosen product however n the credit crunch and recession it is more difficult to obtain a confidential facility. Could confidential factoring be the answer to your problems?

Confidential invoice discounting  is traditionally for long established and profitable businesses with turnover over £0.5m.  A business can release up to 90% of their unpaid invoices simply by sending copies of their invoices to the finance company. The finance company is in effect trusting the business not to supply and fake invoices hence the business has to be trading well and be profitable.

Whilst traditional factoring can release cash your customers will be aware of the factoring company involvement as you will request on your invoice payment be made direct to the factoring company. This can be unacceptable for some businesses who like to keep their funding affairs private.

Confidential factoring is in effect a half way house. A trust account is set up in the name of the business where customers payments are sent to. In addition the factoring company will have a dedicated phone line in the customers name and all credit control will be made in the customers name. In this way the factoring company maintain control of the account and the customer is happy as confidentiality is maintained. This facility is particular useful for businesses which have been used to confidential invoice discounting but due to a change in circumstances no longer qualify.

 
 
 

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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