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Factoring and EFG Funding

Friday, March 4th, 2011

We automatically assume that the high street banks are the best places to obtain funding via the Enterprise Finance Guarantee Scheme. In fact 90% of EFG funding is supplied by two such banks. If for some reason your business doesn’t meet all of the banks criteria than it maybe possible to obtain EFG funding piggy backed on the back of a factoring facility.

EFG isn’t a right. Your business must meet all the banks normal lending criteria. If you tick all the boxes but there is a lack of security in a deal then that is when the EFG funding kicks into place. If you don’t meet the banks lending criteria then you wont get passed first base. Factoring and invoice discounting companies have very different lending criteria and just because you have been knocked back via the banks doesn’t mean you will do so by a factoring or invoice discounting company.

There are two main factoring companies offering EFG funding and they do things slightly different. One funder will use EFG to lend up to 100% of your debtor book. For a business with high levels of turnover this could amount to significant levels of dosh.

Another funder will advance an amount equivalent to any directors loans in the business up to a maximum of no more than 50% of the debtors advance.

Both companies as always have a slightly different perspective on things and so if you have directors loans in the business it may be worth a have discussions with both to see which one will provide the best funding solution.

Who Is doing Enterprise Finance Guarantee Funding ( EFG ) ?

Wednesday, November 17th, 2010

The banks are supposed to be helping small businesses obtain difficult funding in these difficult times and one way is via the EFG or Enterprise Finance Guarantee. Whilst  the EFG does not guarantee success of funding via the banks there are one or two viable alternatives via the invoice finance companies.

The problem with the bank based scheme is that a proposal for funding should meet all the banks normal lending criteria. If you have a proposition that they want to do but the only thing that is stopping them doing it is a lack of security then this is where the EFG scheme gives them the security to do the deal. If for some reason they don’t want to do the deal because your business hasn’t been trading long enough or the financials are not strong enough then it wont get passed first base. EFG funding does not make a bad deal good.

An alternative to bank based EFG loans could be funding via invoice finance companies. One funder provides EFG funding on the back of a factoring or invoice discounting company match funding any directors loans but up to a maximum of fifty percent of the debtor book. Another invoice finance company provides EFG funding to give a business 100% of its debtor book.

Invoice finance companies tend to be a little more flexible than the banks therefore if you have drawn a few blanks then it is worth giving them a call. We will gladly point you in the right direction.

 
 
 

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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