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Release cash against unpaid invoices with debt factoring

Wednesday, January 19th, 2011

Following the traditional quiet  period over Christmas many businesses may find themselves short of cash over the next few months. The good news is that it maybe possible to release cash against unpaid invoices using debt factoring or invoice discounting.

Factoring is available for just about any type of business that provides goods or services on credit terms. Factoring is available for new start businesses, businesses that have had trading difficulties as well as any blue chip companies. This kind of debtor finance is very useful for businesses that have maybe approached their own bank but for one reason or another haven’t been able to obtain funding.

Invoice discounting is traditionally provided in a confidential facility and as such your business has to be stronger and more established to be eligible. Again invoice discounting can release cash against unpaid invoices and provides a very useful working capital facility.

Both factoring and invoice discounting are provided by banks and independent lenders. In our opinion independent lenders are far better at providing factoring because credit control that is provided with factoring is a very important aspect of the service. Independents that specialise in factoring tend to provide a much more comprehensive service and as such the cheaper banks isn’t always the best option

Can I get 120 days factoring finance?

Monday, November 22nd, 2010

Most factoring companies provide a 90 day factoring service however with some providers it is possible to get close to 120 days without any additional charges.

With most finance companies the clock starts ticking on the day you submit the invoice, however with one or two providers the clock starts kicking at the end of the month.

Therefore if you submit an invoice say on the second of the month the 90 days don’t start until the end of that month.

For many businesses this additional working capital as customers seem to be taking longer and longer to pay. If you are factoring with a company that starts the 90 days the day you submit your invoice you potentially will pay more charges and have a reduced funding line. As soon as you hit 90 days and if your customer hasn’t paid then the value of that invoice will be deducted from your available allowance restricting available cash. In addition if there isn’t enough of an available allowance you will go over your agreed prepayment possibly triggering expensive charges for over payments.

Indeed it has been recently suggested that certain finance companies hold back cheques and don’t pay them to their clients account until a day or so after invoices become disallowed after 90 days therefore triggering charges.

Surely not. The fact of the matter is that customers should be paying within the 90 days and a good factoring company should be collecting debt in the necessary time scale. Unfortunately this doesn’t always happen and as such a few extra days funding can make a big difference.

A good factoring broker will be able to add value and select the most appropriate finance company for your particular requirements.

Can I get Trade Finance ?

Friday, November 5th, 2010

It is now possible to obtain trade finance on a stand alone basis subject to the type of goods you are buying and selling. Traditionally cash for trade finance deals have only been available from the banks via an overdraft facility or a specialist but onerous division of the bank.

International and domestic tade finance is available from most factoring and invoice discounting companies however the god news is that there one or two funders coming into the market that can provide funding on a standalone basis.

Imagine the scenario. You have either pre sold goods with little trading history or you have an exceptional track record of selling goods but you don’t have the cash to purchase your goods. You go to your bank and they dont want to help because you haven’t been trading long enough or you have had a poor trading history ( from the view point of a bank)

A specialist trade finance company has the ability to provide you with your much required working capital. Depending on the stock you are buying, the margin in the deal, who the end customer is and the length of time it takes to sell the goods, funding may be available on a stand alone basis.

Trade finance can also be used in conjunction with a factoring or invoice discounting facility to provide a complete funding solution.

 Unlike the banks that promise the earth and take an age to say no we will be able to provide you very quickly as to wheteher funding may be possible. Give us a call today to find out on 0161 980 0577 or 020 3301 4540

Factoring and bad debt protection

Monday, October 25th, 2010

In the current economic climate bad debt protection or credit insurance will provide much needed protection and comfort should any of your customers go bust. However not all factoring companies offer the same level of protection. Therefore when choosing a factoring company it is important that you take this into consideration.

It must also be remembered that most most insurance and bad debt protection will only pay out when a customer goes bust. If for some reason your customer wont pay or can’t pay but hasn’t gone bust then it wont pay out. This is worth bearing in mind.

A bank based factoring  company may provide insurance from their own in house insurance company. This may be provide a blanket insurance cover if their are any future problems. However this may be further complicated  by the exposure to any one customer. If your exposure is more than say 20% for one customer than credit insurance may be restricted.

An independent factoring company don’t use their own in house insurance but use independent insurance agencies and as such different funders may use different insurance companies and as such levels of insurance from one company to another may vary considerably. It all depends on what their experiences are in varying sectors.

Therefore worth gettting an independent factoring broker to search the market

Guide to Factoring

Tuesday, October 19th, 2010

A quick search of the world wide web will reveal hundreds of thousands of companies offering factoring services. But how do you know which company or service to go for.

Some simple advice will hopefully point you in the right direction. If full factoring is required with full credit control than it is widely believed and  recommended that a specialist or independent factoring  company is better than a bank owned factoring company. Why? Because these smaller companies have been set up with offering factoring and factoring only. They are usually big enough to provide the right level of funding however they are small enough to care about your business and provide the appropriate level of  support and flexibility which is so much lacking with some of the bank based lending services.

Which factoring company is best for you depends on the nature of your debtor book, how long your business has been established, how profitable your business is, the level of turnover and your geographic location. There are many a factoring broker that after only a brief discussion will be able to quickly determine which two or three funders are best for your particular businesses requirements. And the good thing is that the service is usually free. A broker will usually take an introductory commission from the factoring company. All lenders offer commissions to brokers so you can be assured that you will be introduced to the best possible funder

XL Business Finance has been helping business find the best factoring provider for over 10 years and as such we are are in an excellent position to advise and help your business provide the most appropriate ffactoring partner!

We’re Back!

Friday, October 15th, 2010

Following the construction of our fancy new website by our good friends at Marketing Insite we are hopefully  back in the  swing of blogging. Yipee I here you cry. Not!

During the last few months or so it is fair to say that obtaining business finance still continues to be difficult especially when it comes to dealing with the banks. Business directors and owners are also beginning to realise that the Enterprise Finance Guarantee Scheme ( EFFG) as provided by the banks is not what it is cracked up to be. Unless the bank wants to deal with you in the first place and the lack of tangible security is the only thing stopping the bank wanting to do the deal then the banks  will not offer funding.

In addition it was also possible to obtain grants and loans via local development agencies. Due to the government cut backs these have all virtually disappeared. So what options are there left for businesses requiring additional funding?

There is and always will be various hire purchase and finance lease companies offering funding , however due to supply and demand of funds it is worth consulting a good independent finance broker to search out the best possible deals. More often than not many businesses require additional working capital facilities. We have never been a great fan of bank overdrafts due to the fact they can be quite restrictive and are always repayable on demand. So that leaves us with traditional factoring and invoice finance facilities. Once upon a time this was viewed as a lend of last resort however invoice finance is still one of the most competitive and buoyant growing areas of finance. In addition competitive funding is provided by a large variety of independent companies , banks and building societies all offering slightly different products for different types of businesses.

Factoring a scaffolding company

Tuesday, May 25th, 2010

On the basis that most scaffolding companies are working to contract many such businesses wrongly assume that they are not eligible  for a factoring or invoice discounting company. The good news is that one or two invoice finance companies will provide a factoring service.

However these factoring companies are not your high street banks but independent companies that specialise in factoring and construction finance. They have their own in house quantitative surveyors that can accurately asses the value of work undertaken. It is very unlikely that a scaffolding company will get the full 80% but more likely that a maximum of 60% prepayment will be achievable. In addition the factoring company will be looking to make sure that all the scaffolding equipment is mainly free of finance. This is because they wouldn’t want a leasing company removing the scaffolding half way through job and thus making all the contract null and void.

The finance company needs to know that they have control over the equipment in the event of an administration so that they can finish the job and get paid. Any factoring company that doesn’t understand this is potentially putting the directors at risk via any personal guarantees that may have been given. Ass such it is worth giving us a cal to see if a factoring facility will be beneficial to your business. We have over 10 years experience in this market and we are certain that we can add value to the proceedings.

Using an Invoice Finance Broker

Friday, May 21st, 2010

Any search on the world wide web will reveal numerous factoring and invoice discounting companies. Some of them will be actual lenders, others will call themselves “independent” in that they are not bank owned but they are still a lender and some ae brokers. In our opinion using an invoice finance broker will save you the most time and help you obtain the most appropriate funder for your particular requirements.

However there are two types of brokers. Some of the websites you see on the net are more like like cost comparison sites and will give the business the opportunity to compare quotes. These sites will link into half a dozen factoring and invoice discounting companies and as a result you will be bombarded with calls from half a dozen companies. We are not sure how this type of service can be providing best adviser particularly when no one actually speaks with you to discuss your business.

Surely the best type of broker is the one that either has a meaningful conversation with you in order to find out about your business or even better they take time to visit. At XL Business finance we have access to all the finance companies on the cost comparison sites and far more in addition. Following an initial interview or meeting we can pinpoint the two or three most appropriate invoice finance providers. And the good news is that this service is absolutely free. If XL Business Finance makes an introduction to finance company and they take you on board as a customer a fee will be paid by the finance company to ourselves. This fee is in no way loaded to the charges paid by your selves.  ALL invoice discounting and factoring companies pay the same level of fees because the broker market is one of their biggest sources of business. Therefore you can ensure you are getting  totally independent viewpoint

Import Finance

Monday, May 17th, 2010

Import Finance enables a business to theoretically import goods and sell them to an end user without having to use any of their own cash. Providing there is a reasonable margin within the deal and the goods have been presold then an import finance facility will dove tail nicely with a factoring or invoice discounting facility.

This type of trade finance facility isn’t readily available from high street banks. A bank will provide a trade facility for a business to import goods however any facility provided will be done so against the strength of the business and profitability . In many circumstances a bank will also want additional security such as a charge over property. A bank type trade facility will only enable the strongest of businesses to obtain funding.

However a specialist trade finance company will proive a seamless facility for most types of businesses to new starts to businesses which maybe have had some trading difficulties. On providing evidence that the goods have been presold funding can be obtained to import these goods. Obviously the finance company will take title during the process. On delivery an invoice will raised to the end user. Either the invoice is paid in full and the trade facility is repaid or the invoice is discounted via a factoring or invoice discounting facility enabling the end user to sell the goods before having to pay for them. Assuming there is more than 20% profit in the transaction the factoring facility or invoice discounting facility will pay 80% of the invoice and hence again pay the trade facility in full.

International Trade Finance Explained

Friday, May 14th, 2010

There are a  number of ways that specialist trade finance companies can help your business. In many cases a complete funding solution is available which might not be available from the banks. A business that has a requirement to import goods maybe able to obtain funding providing that they have confirmed orders for their goods.

For example if a wholesaler is importing televisions but doesn’t have the cash to buy the televisions from the foreign supplier and provided the wholesaler has orders for the TVs in the UK a complete funding package will be available. An import facility is provided for the wholesaler to import the TVs. As soon as they hit the UK and are dlivered to the end customer an invoice is raised as per usual providing however many days credit. The wholesaler will then factor that invoice with the same finance company to repay the trade element of the facility providing a dovetailed finance solution.

This is slightly different from how the banks work that don’t look to be repaid from a factoring or invoice discounting facility but from the sale of the goods at some point in the future. The banks way of doing things is slightly more risky and as such they will look to support business that are only profitable, with a strong trading history and a proven track record.

The dovetailed solution poses a less of a risk to a finance company as they keep control of the transaction from start to finish. Although these facilities may be more expensive than a bank they enable businesses that have no track record or are even new starts or have very little cash to obtain import finance.

 
 
 

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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