In addition to trying to win new business, companies are equally concerned about whether their existing customers can pay, and on what terms.  Businesses often rely on loans and overdrafts to provide the capital they need; in recent years however, a variety of invoice finance options, such as factoring have helped SMEs to ease their funding gaps.

Not only do these arrangements have more flexibility than bank loans, but they are quicker and tailored to a company’s specific requirements. In both good and challenging markets, invoice finance can provide the flexibility and access to capital that a business needs to thrive and grow. The annual cost of a factoring facility starts as low as 1% of sales so it is a very cost effective option for business owners.

ABL lenders look at things in a slightly different perspective. Whilst it is important that they buy into the business and are comfortable with its trading performance they are mainly concerned with the available level of security. An invoice discounting facility will provide funding of circa 85% of the unpaid debtors. They will also consider providing additional working capital secured against plant and machinery. They will lend anything up to 80% of its value depending on the circumstances around the deal. A true revolving stocking facility may also be appropriate and potentially commercial mortgage funding is also available. In addition an ABL lender is not necessarily after the clearing banking and as such you will be able to leave your clearing with your existing high street. This potentially makes for an easy transition to potentially more flexible and supportive funding arrangements.

Often a small business must undertake a large capital equipment investment in order to grow. The balance sheet of the business is often not strong enough to justify a Hire Purchase or Finance Lease facility.

Without capital investment the business can not grow and become more profitable. A chicken and egg scenario.

Small Business Finance is an area in which XL Business Finance has a great deal of expertise. As an independent finance broker we understand the problems of small business finance, arranging equipment leasing and machinery finance for example.

At XL Business Finance we can provide small business finance for investments from as little as £1000. This could be useful for providing tax efficient leasing for office furniture, computer equipment and telephone systems for instance.

Do not think of us as a company who provides you with a one off service to get you up and running then disappears into the night. We work along side many clients for many years providing finance solutions such as factoring, debt factoring or factoring invoice discounting facility.

As an independent factoring broker XL Business Finance can provide you with the best Business finance to meet your specific requirements.

Unlike asset finance specialists where commission is added into the deal, the factoring broker is paid by the factoring or invoice discounting company from the income they would normally charge.

There are some important factors that need to be taken into account when choosing the right finance company. The biggest factor is to identify whether your business requires factoring or invoice discounting. Not all funders are equally specialised in factoring and invoice discounting. In fact some may just concentrate on one aspect of funding. The size and length your business has been trading needs also to be taken into consideration. High street banks are not always the most appropriate funder.

XL Business finance is one of the North of England’s premier independent finance companies with established links to many of the UK’s leading finance houses. Call us today, we are happy to discuss your specific situation.

We all know there are the high street banks providing invoice discounting facilities. There are providers that are owned by lessor known banks foreign banks which tend to havce their own atonomy. And then there are the independents that are not owned by the banks but  are privately owned. Which funder is best for you depends upon your own particulkar circumstances and  a good invoice discounting broker will certainly be able to add value in the process.

There are two main charges to an invoice discounting facility. The interest rate for the money borrowed and the service fee. The interest rate is usually a percentage over base rate and is comparable to a bank overdraft rate. Some finance companies charge a min base rate and some link to LIBOR. Bank base rate is not always the same so it is always worth taking into consideration.

The service fee is a percentage of annual turnover however beware some invoice discounting companies charge a refactoring charge. This can be as much as 1% of any invoices that go over 90 days. Whilst this will not be a problem if your debt turn is good it is worth noting because if your customers take longer to pay it will increase the cost of the facility.

An invoice discounting will also charge a take on fee which can be anything from a few hundred quid to a percentage of the arranged facility.

At a review meting the bank announced that they would no longer be able to finance the African invoices. A change of policy apparently. The customer during 15 years of trading had never had a bad debt into Africa and in any case most of the debtors could be credit insured. This obviously had a dramatic affect on the businesses cash flow and as such the £250k in case of need overdraft facility quickly reached its limit.

In our opinion a switch from one high street bank to another would certainly be out of the frying pan and into the fire. We therefore introduced our customer to a couple of lessor known invoice discounting ccompanies that specialise in bigger deals. They kind of start off where the high street banks start getting uncomfortable. They tend to be owned by foreign banks however unlike invoice discounting companies attached to high street banks they have their own autonomy. In addition because they are foreign owned they tend to be able to deal with world wide markets.

It is always worth getting an alternative to a high street bank and a good independent finance broker will undoubtedly be able to point you in the right direction

We have seen this recently with very strong businesses that have seen profits drop but for positive reasons such as investment in new equipment and premises. The fact is the banks don’t always like to see a drop in performance irrespective of the reasons. Comined with restructuring and merging with the high street big banks you will find a very erratic approach to their lending criteria and possible clipping of facilities.

The good news is that there are alternatives to the high street banks. During the good old days, the recession and now the slow recovery these alternatives have always taken a consistent approach to their lending criteria. These are specialist invoice discounting companies , whilst funded by big lessor known merchant banks have their own autonomy and there is enough variety to cove most situations. A £3.0m facility is a drop in the ocean for a couple of these funders. At £3.0m plus even some of the high street banks might start getting a bit jittery. It appears that the banks want to collect as much money in at the moment rather than lend it out.

Traditional bank funding as with most facilities is provided for own bank customers and is based on the trading performance of the business. A business that has been trading for at least three years, is extremely profitable, has a strong balance sheet and possible has tangible security will have a good chance obtaining funding from the high street banks. As with any finance product not all banks will offer stocking facilities and the product will vary from bank to bank. A good independent finance broker will be able to point you in the right direction.

Stocking on the back of a factoring or invoice discounting facility is slightly different. A business that is buying high value goods which can be easily disposed off maybe able to obtain funding irrelevant as to their trading history. For example non perishable items such as TVs which are being imported for a third of what they are being sold for will be more easily fundable than frozen fish for example. Whilst all factoring and invoice companies offer stocking facilities there are only a couple that offer a true revolving stocking facility. Certain funders offer an increase in facility to provide funding up to a 100% of the debtor book however this is done so on a short term basis. This overpayment secured against stock will be repaid back over a 12 month period.