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

At a time when many businesses are still struggling for cash the financial institutions have tightened up their criteria as to who qualifies for confidential invoice discounting. A business would need to be well established and have a profitable trading history. The finance company has far less control with an invoice discounting company because they are unable to verify all the invoices and as such it is potentially open to fraud via fresh air invoicing. Factoring which is just about available to any type of business providing you haven’t previously defrauded a factoring company. The factoring company is able to phone your customers to verify invoices and because they also chase payment on your behalf they have a much greater degree of control.

Confidential factoring however provides a solution that provides a compromise for the business and the funder. With confidential factoring the finance company provides the business with their own dedicated phone line and credit controller. They chase the debt in your business name and if any of your customers call for the credit controller the company will answer in your business name. Any funds collected are paid into a trust  account in your name and as such the finance company can exercise a reasonable amount of control. Hopefully this will give you the confidentiality that your business desires.

This is a relatively new product and as such anyone that has had any experience with confidential factoring we would be very interested to hear your opinions.

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.

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.

There are usually a number of different reasons why a finance company will restrict your overall limit. It may be because your business has had a dip in performance and they wish to monitor your activities more closely. The banks in particular will get nervous in this situation and as such try and reduce their overall exposure. At a time when your business needs cash most this can be massively inconvenient and can possibly make the trading situation worse.

It may be that you have beached your covenants. The most common being pre invoicing or misappropriating cash. More often and not these more serious breaches result in being given a red card. When faced with a potential new funder it is always best policy to come clean and explain the reasoning behind your actions. All factoring and invoice discounting companies will take a reference and any misdemeanours will always be found out.

Or it could be that the finance company is  uncomfortable with  the overall  exposure not because there is anything wrong with your business but because the funding limit is getting too big for that particular business. In this situation an amicable parting ways is usually the best option. Even some of the high street banks get nervous with some of their larger clients and as such some professional advice and help will enable you to find the most appropriate funding partner.

Too often the easiest option is to be  railroaded into your clearing banks factoring or invoice discounting company. This may not always be the best option. As you probably know factoring and invoice discounting release up to eighty percent of a businesses unpaid invoices in ready cash ready to be used for working capital requirements.  However there a number of factors that need to be taken into consideration when choosing a finance company. Like any business different factoring and invoice discounting companies have different sweet spots. The problem with the high street banks is that try and be all things to all men and can often fall short on service and delivery compared with other independent providers. In certain circumstances the bank may be the best choice and indeed one bank in particular is exceptional providing international trade finance whereas another is most excellent in providing funding against contractual debt.

In addition certain finance companies are most excellent at invoice discounting but struggle to add the required level of service to deliver a competent full factoring service. When it comes to full factoring with credit control and debt collection specialist and independent factoring companies provide a far superior products to the banks. It can be difficult to argue against the banks when it comes to invoice discounting however there are benefits to choosing a third party provider such as not having too many eggs in ones basket.

Invoice finance which can either be factoring or invoice discounting cannot be withdrawn at a moments notice and so long as you are operating within the terms of the facility should provide you with a reliable and consistent form of cash flow finance. Unlike a bank overdraft which is secured by bricks and mortar and or a personal guarantee invoice finance is secured against your unpaid debts. So long as your customers pay their debts you should never be at risk. In addition it is often possible to obtain credit insurance for if any of these customers god forbid go bust on you.

Invoice discounting is usually provided in a confidential manner and is normally appropriate for businesses that are established , profitable and have good internal credit control procedures. Most invoice discounting companies will release up to 80% against your debtor book with the remaining 20% being paid to you when your customer pays less any charges due.  There are usually two charges for the operating the facility. Firstly there is the interest charge , an amount over bank base rate which is applied to the amount of cash you actually borrow and not the facility amount. The rate is usually comparable to a bank overdraft and in some cases can actually be cheaper. The second charge is for operating the facility and this is charged as an percentage of actually turnover. The amount charged depends upon the turnover, the number of invoices and also the quality of your invoices. Most invoice discounting companies have a comparable charging structure.

Factoring is usually provided on a disclosed basis SO that your customers are aware that you are factoring your invoices. Because factoring finance is provided in a more open format it is usually available to most businesses including new starts , loss making businesses and businesses that have been declined invoice discounting. The facility is provided in exactly the same way however the factoring company will be responsible for credit control and will add value to your business for making sure that your invoices are paid on time.

Confidential invoice discounting is a form of invoice finance and as the name suggests the facility is provided in a format whereby your customers are unaware that you are discounting your invoices. Many businesses for a variety of reason would rather keep these matters confidential. However confidential invoice discounting is not on offer for every type of business. Invoice discounting can be susceptible to fraud and as such a business must be well established, be profitable with a sound and profitable trading history. A suitable credit control system must also be in place which the potential finance company will require to check o ensure you are capable of collecting your invoices.

Factoring which is similar to invoice discounting provides credit control as an additional feature. The factoring company will chase your customers ( usually by phone) on your behalf to ensure your invoices are paid in an efficient and timely manner. As your customers are aware that you are factoring your invoices and the finance company is in regular contact with your customers the facility is less susceptible to fraud.  Therefore just about any type of business will be able to obtain a factoring facility. New starts, loss making businesses, phoenix companies are all welcome to apply!

However there is a subtle difference between factoring and invoice discounting. Whilst both products release cash against your total debtor book factoring usually provides credit control as an additional service and invoice discounting is usually provided on a confidential basis. Which facility is best for your business depends on your own requirements and trading performance. XL Business Finance is one of the countries leading factoring and invoice discounting brokers and we have been helping businesses for over ten years obtain the most appropriate funding partner. You wouldn’t go to your butcher for open heart surgery so why go to your bank for finance advise. We believe that we are more qualified and better placed to help a business choose the best funding partner.

As invoice discounting is usually provided on a confidential basis this means that your customers are unaware that you are discounting your invoices. The finance company is unable to call your customers and verify the amount of your invoices. therefore invoice discounting is deemed to be a more risky facility and as such is usually only available for profitable more established businesses that have th necessary controls and procedure in place. Factoring however is conducted in a more open way and as such the finance company can call your customers to check invoice amounts and as such it is a facility more widely available.