Asset finance leasing - XL Business finance
  XL Business Finance Blog » Factoring

Posts Tagged ‘Factoring’

Why Invoice Factoring is better than a bank overdraft

Wednesday, January 27th, 2010

Hopefully now that we are out of the recession we will once again start to see businesses grow and to flourish. The benefits of invoice factoring during a period of growth are obvious however many businesses will be tempted to go down the overdraft route which in the long term may restrict a businesses cash flow and ability to operate from a liquidity point of view. It is also important that we choose the right factoring or invoice discounting company because not all of them are the same and they don’t offer the same level of funding and flexibility.

The two main problems with bank overdraft the level of the facility is often restricted by the amount of security available. A token overdraft facility without providing additional security  may be available depending upon the level of profitability however more often than not it is never enough. Therefore as a business grows and you need to increase the amount of working capital it may be difficult to obtain an increase. Secondly overdrafts are repayable on demand. Until the recession I don’t think anyone believed the bank would pull overdrafts however during the credit crunch and the recession the banks have shown their true colours. We have heard horror stories about the banks withdrawing overdrafts and forcing companies into administration. With factoring or invoice discounting, so long as you don’t breach the terms of the facility it is not possible for the facility to be withdrawn. And even if you breach the terms of the facility it is more likely that your factoring or invoice discounting provider will work with you to a satisfactory solution.  It is therefore important that you choose your factoring or invoice discounting company carefully to make sure they are approachable and potentially flexible. It is more likely this will not be a bank owned provider but this doesn’t mean a facility will be more expensive.

Protect your cash flow with invoice discounting

Tuesday, January 26th, 2010

News on the high street today is that we are finally out of the recession. This is great news however don’t expect the banks to suddenly ease up on their underwriting criteria. We believe that it will be many months possibly years before the banks get back to where we were before all this kicked off.

Hopefully we will see businesses once again seeing an increase in turnover and as a result more profitable times ahead. Any increase in turnover will undoubtedly see an increase in working capital requirement. Do you really want to rely on the bank overdraft to provide the necessary working capital for your business? I don’t think so. While a business is expanding invoice discounting will provide the perfect cash flow finance facility that will grow with your business.

XL Business Finance has been helping businesses for over 10 years with their invoice discounting and factoring needs. Both are forms of invoice financing that will release up to 85% of unpaid invoices immediately. Providing there are no added complications to your business factoring or invoice discounting facilities can be up and running in a couple of days.

Although an overall funding limit will be set against your business this is reviewed on a regular basis and will grow as your business expands. As and when your customers pay you typically in 90 days from the date of the invoice the proceeds are used to repay the initial 85% advance and the remaining 15% is paid back to your business less an interest payment and a service fee. Interest is charged at a percentage over base rate or Finance House Base Rate and the service fee can range from 0.2% of turnover to 2.5 % of turnover depending on the whether you are utilising factoring or invoice discounting.

Both products are excellent for a businesses cash flow and we can help you obtain the most appropriate funding product.

Credit limits for factoring finance

Monday, January 25th, 2010

One of the biggest issues facing small businesses in the current financial climate isthe lack of funding against certain customers. It is all well and good obtaining a factoring facility with a headline 95% prepayment if the finance company restricts funding against certain customers. Unfortunately many businesses will place that invoice finance with a factoring company promising the earth however if you are not careful you will end up with a finance company that potentially will not deliver.

When choosing a factoring comapny it is well worth asking the potential funder what credit limits they will place against your top ten customes. You will be surprised how this will vary across the number of available factoring companies. XL Business Finance has ten years experience of helping businesses choosing the right finance company and as such we can add value to your business by doing all the hard work.

In addition it is worth considering the overall credit limit. A bank owned factoring company although may offer a cheaper facility they are less likely to increase the overall funding limit as quick as an independent factoring company. Therefore as the turnover of the business increases you may find that funding is restricted. A potential customer told us recently that he wished he had chosen a more flexible bur only slightly more expensive independent company rather than the slightly cheaper less flexible bank based factorig company. A change of factoring company resulted in a much increased availability and more cash which massively helped the cash flow and performance of the business.

As discussed in previous blogs there are many criteria we will consider when choosing the right finance comapny. Size, location, quality of the debtor book, profitability, length of time established and market sectoir are all important factors.

Invoice finance in the construction industry

Friday, January 22nd, 2010

Any business which operates in the construction industry or any business which invoices stage payments as part of a contract knows how difficult it is to obtain funding . Some banks maybe prepared to offer some form of overdraft however as soon as you mention contracts to most factoring and invoice discounting companies they will run a mile. The good news is that there two finance companies providing invoice finance against applications in the construction or any industry involved in stage payments. Depending on your own particular circumstances XL business finance will help you find the most appropriate invoice finance company.

However the two finance companies are very different indeed. One is a bank owned finance company and the other is an independent finance company. The independent company  is in our opinion the leading finance company in this sector and will fund  uncertified application. It also understands that actual payments against application maybe slightly different from the money received and it also understands that VAT and PAYE may have been deducted. In our experience finance via the bank maybe a bit hit or miss. Their  headline prepayment might be higher however they will have a very strict funding limit therefore as the business grows it might be difficult to obtain increased funding. As this is one of the big banks the level of service tends to be a bit hit or miss and not all the account managers understand contractual invoicing. If payments are slightly different they will put the cash to a suspense account because it doesn’t exactly match leading to disallowed credit limits and further reduction in funding.

I addition not all their account managers will pay against uncertified applications preferring to pay against certified invoices which can delay payment further!!!

Need invoice finance advice?

Thursday, January 21st, 2010

There are so many invoice finance products and companies to choose from. A quick search on the internet will reveal hundreds of finance companies all offering similar products and services. Although invoice finance is mainly about getting cash against unpaid invoices there can be a big difference between the many different companies and how they deliver their product. To make sure you get the best factoring or invoice discounting facility for your business it is advisable that you speak with a specialist independent factoring and invoice discounting broker. A good one will know the market better than any accountant and going to your bank for financial advise will be like going to your butcher for open heart surgery.

Thankfully XL Business finance has access to twenty or more factoring and invoice discounting providers. We know the market extremely well and following a brief consultation we know exactly which provider will be best suited for your own particular requirements. We will recommended two possibly three finance companies that we believe will provide the best service for your own unique set of circumstances. The good news is that this does not cost you a penny. We will get an introductory commission from the finance company. All factoring companies pay roughly the same commission so we are not tied in one any one finance company. It would be pointless introducing a business to a finance company that wont provide the best service. The most important thing is that we get you with the right finance company and that you stay with that finance company.

There are many different factors which will influence our choice of finance company. Do you need factoring or invoice discounting, geographical location is important, turnover, number of debtors, quality of debtors, debt turn, how long your business has been established and the level of profitability are all important aspects and ill have a bearing on the right finance company.

Invoice Factoring (4)

Wednesday, January 20th, 2010

Invoice factoring is still rone of the most buoyant forms of finance available in the UK today. There are still plenty of finance companies offering various forms of invoice finance. Unlike the asset financing and leasing market which seems to have dried up somewhat the choice and availability in the invoice factoring market appears to be plentiful with plenty of options and choices. A quick search on the internet search engines will reveal numerous finance companies offering invoice factoring. There are just so many to choose from. How do you know which product is best for your business and how do you know which invoice factoring company will be best suited ti delivering the right sort of service to your business. In short a good independent factoring broker will be well placed to advise you of the may products and services available. XL Business Finance provides a free factoring and invoice discounting service which ensures  the most suitable finance companies are recommended to your business.

OK it is free in that we will not charge you a fee however we do take an introductory commission from the finance company. We are confident that we will provide y0u with the names of  two possible finance companies that are most suited to financing your business. Unlike some independent invoice  factoring brokers we are not tied into any one particular finance company. We have access to over twenty or so different finance companies. Brae some factoring brokers ( particularily  the ones that have different finance company logos on their site) take an introductory commission just for passing the referral. Nothing else happens except you get bombarded with loads of calls. By using XL Business Finance we control the referral part of the process which keeps appointments and provision of information to a minimum. If you happen to read this blog before the end of Jan 2010 you will be entitled to a free Mars bar!!!!!!!!

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.

Business Financing for a new start business

Sunday, January 17th, 2010

There are so many business financing options available for a new start business.  Nearly all the banks can offer a plethora of funding options however which ones are best suited for a new start business.

At XL Business Finance we have been helping many new start businesses for over 10 years and our experience and expertise ensure that a business is provided with the very best business finance options.

Understandably many new starts are drawn to their banks whom can potentially offer  equipment and asset finance, commercial mortgages, overdrafts as well as  factoring and invoice discounting facilities.

It is tempting to go with the bank who are offering a packaged deal however in doing so you might be storing up future difficulties when it comes to obtaining further credit in the future. Banks are very good at giving it to you with one hand and then taking it away with another. For example, we have seen many instances whereby the bank will offer a small overdraft facility in order to win the factoring business. All that happens is that the customer ends up with reduced limits on the factoring facility to counterbalance the overdraft.

In addition we have seen these initial overdrafts being completely withdrawn after a relatively short period of time. The business would have had far better cash flow if they had gone with a more flexible factoring company .

It may also be that a bank will offer you finance to purchase some assets or equipment. They mat take additional security to provide the funding. These deals may seem very attractive in terms of the interest costs however these assets may just as well be financed via a third party leasing company. A little further down the line you find yourself asking the bank for some fundeing  for something which can’t be leased but the bank are fully exposed.

We would recommend that if  third party finance is available at the start then this should be seriously considered so you don’t have all your eggs in one basket.

invoice finance or overdraft

Friday, January 15th, 2010

Without a doubt we would recommend invoice finance over a bank overdraft any day of the week. There are obviously exceptions of course. Invoice finance provides 80% of your unpaid invoices as soon as you have raised your invoice. It provides a flexible approach to your working capital requirements. Obviously this wont work if you are getting cash on delivery or on the point of sale. Uner these circumstances you would need an overdraft facility to provide you with adequate working capital.

There are many advantages to invoice finance compared with a bank overdraft. Overdrafts are normally secured aginst property and are fixed at a set amount with little scope for increasing as your business grows. More importantly it should be noted that a bank overdraft is repayable on demand. If your business takes a turn for the worse potentially the overdraft can be withdrawn without notice. Unfortunately in the current economic climate we have seen happen all too often. This will never happen with an invoice finance facility.

Invoice finance can be provided by way of a number of products. Factoring in addition to providing cash against unpaid invoices provides a credit control facility. Invoice discounting can be provided on a confidential basis and as such only provides a working capital facility. Invoice discounting is suitable for more established businesses who will have their own credit control facilities in place. Different finance companies provide slight variations on these two products but in main these are the two most common invoice finance products.

A quick search on google will reveal hundreds of potential finance companies. Banks are good at invoice discounting however there are independent companies that are capable of providing an equally acceptance product. As a rule of thumb independents are better at providing factoring products. XL Business Finance can help you find the most appropriate finance company.

Factoring a new start business

Wednesday, January 13th, 2010

Arranging factoring finance for a new start business should be relatively straight forward however not all factoring companies are the same so it is imperative that if you are starting a new business that you choose the correct type of finance company for your specific requirements. A well run factoring service will release up to 80% of your unpaid invoices and provide you with much needed working capital.  

The most important aspect of a new start business is to get a proper level of funding and that the finance company collect your debt as quickly as possible. It is important that you are never more than one or two phone calls away from a decision maker. XL Business Finance has been helping clients choose the most appropriate invoice factoring company for many years and as such we have added value to many new start businesses.

As a rule we would not recommend a bank for factoring although there are instances when we would. One bank in particular is quite good at financing  contractual debt and another is quite good at financing foreign debt. Typically an independent based factoring company provide a much better service than a bank based factoring company. Most independent s will telephone all your customers whereas a bank might only phone the top 3 customers

It is also worth finding out where your account will be run from as there is no point in dealing with a factoring company at the other end of the country when there could be an excellent finance company located within a few miles. We will take into consideration other factors when helping you choose the most appropriate finance company.

The quality of your sales ledger, the number and concentration levels will all help to make a recommendation. It will not take long to do an assessment of your business and we will give you a few funders to have a look at . This service is free!

 
 
 

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 Limited are authorised and regulated by the Financial Conduct Authority FRN 718737).

XL Business Finance, Eaton Place Business Centre, 114 Washway Road, Sale, Cheshire M33 7RF UK.

 

Manchester, Liverpool, Leeds, Preston, Sheffield, Stoke, Merseyside, Lancashire, Cheshire, Staffordshire