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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.

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.

Confidential Factoring or Confidential invoice discounting?

Monday, January 18th, 2010

The advantages of being able to release up to 90% of your unpaid invoices is obvious however many business are still put off invoice finance not because they think there is still a stigma surrounding the facility but because their customers will not allow it. Therefore a traditional factoring facility is unacceptable because the finance company will need to verify most of your invoices. A traditional invoice discounting facility is normally only available to long established and profitable businesses. Therefore a good chunk of businesses may find themselves caught between a rock and a hard stone. The good news help is hand and XL Business finance has access to a number of finance compasnies and creative finance products that could fill a few gaps in the market.

Many businesses will not be eligible for confidential invoice discounting because they haven’t been trading long enough, turnover isn’t big enough, they are not profitable enough,  they have gone through a prepacked administration or their existing factoring company has given them notice for breach of the facilities. From the finance companies point of few confidential invoice discounting is far more risky because it is not always possible to verify the debt and is therefore more open to fraudulent activity.

However one finance company XL business Finance deals with are prepared to give customers that don’t meet the normal criteria on invoice discounting providing a facility provided there a good systems in place. From a management point of view invoice discounting is less time consuming and potentially more profitable. For the first six months or so they may run a shadow ledger to make sure the facility is being run properly.

Confidential factoring provided by a different finance company is a half way house. You will be given your own dedicated credit controller who operates in the name of your business to ensure all the invoices are collected in the normal way. You will also be your own telephone number providing all the advantages of a full factoring facility with the confidentiality certain businesses require.

 

 

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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.

I want invoice discounting but I have only been offered factoring!

Sunday, January 10th, 2010

We are seeing many businesses being forced by their banks  to use factoring as opposed to more risky invoice  discounting. This is usually following some adverse trading conditions where the bank wish to keep a tighter grip on the business. The good news is that there are still one or two independent based finance companies that would rather fund via confidential invoice discounting rather than factoring.

Although factoring and invoice discounting are both forms of invoice finance it is traditionally harder to obtain invoice discounting as opposed to factoring. From the point of view of any finance company invoice discounting is a far riskier finance product. Usually invoice discounting is provided on a confidential basis. Many customers prefer the confidentiality that invoice discounting provides as there is still in some circles a stigma against using such products. However the confidentiality of invoice discounting does bring its risks from the finance companies point of view. As the customer you will send copy invoices to the finance company against which approx 85 % of the value of the unpaid invoice is paid upfront. As such invoice discounting is more open to abuse and as such a business must normally have been trading for a number of years, have a strong balance sheet and be profitable before a bank will consider them for invoice discounting.

With factoring the fiannce company maintains afar greater degree of control as the financec ompany will verify the sales ledger on a regular basis and will have more hand on approach to running the facility. Therefor phoenix businesses, loss making businesses and new start businesses may be eligible for factoring but not invoice discounting.

However one finance company we do business with would rather do invoice discounting as opposed to factoring. For the first few months of the contract they will keep a close eye on it and run a shadow ledger and if everything goes well ther business will have a fully operational invoice  discounting facility.

Business Finance from asset based lenders

Saturday, January 9th, 2010

Business Finance covers a great number  of financial products many of which can be provided by independent finance companies as opposed to bank based lending. We would suggest that organising business finance has a great deal of benefits when using independentbased lenders. In the current economic climate it is advisable to spread as many types of lending with as many different lenders as possible. Never has it been more prudent not to have all your eggs in one basket. Fundng from asset based lenders is still relatively abundant therefore in theory it should be easier to be less reliant of the banks.

At XL Business Finance we would recommended that if possible you should only use your bank as a clearing facility. An invoice discounting or factoring facility is preferable to a bank overdraft. Invoice finance grows with the business  whereas a overdraft which is repayable on demand will often be fixed at a set amount which depends on the level of security available. An overdraft amount is nearly always never enough.

Also there is absolutely no reason why you should need to have a commercial mortgage with your own bank. There are a number of specialist commercial mortgage institutions offering excellent deals. keep your commercial mortgage separate from your own bank to prevent the bank having too much control, on your businesses finances.

Equipment finance by way of hire purchase and leasing can easily be arranged via third party leasing companies. Again using a different finance company will prevent having too many eggs in one basket.

XL Business Finance has been helping many businesses for over 10 years to obtain the most flexible and competitive funding available in the market place. We understand how to structure a proposal and what information the finance companies require resulting in a very high conversion of our applications.

how to choose an invoice financing company

Thursday, January 7th, 2010

Invoice financing is a form of cash flow finance which can release up to 90 % of your unpaid invoices. It can take form in a variety of different variations. There are basically 3 0r 4 core products and the 50 or so finance companies offering invoice financing provide slight variation on each of the  core products. Invoice financing can take form as factoring , invoice discounting , confidential invoice discounting and confidential factoring. Invoice finance has beenone of the fastest growing areas of finance in recent years and even in the current economic climate and credit crunch there are still many finance companies offering such products. At one time invoice finance was seen as a lend of last resort. This stigma has just about disappeared especially when you consider the risk of using a bank overdraft which have always been repyable on demand. Invoice financing will provide a more secure form of funding that potentially can grow as your business does. XL Business Finance has been helping and advising businesses for nearly ten years and placing them with the most appropraite finance company.

Which finance company is best for you depends upon a number of different factors. Firstly do you require factoring or invoice discounting. The finance companies which are good at factoring are not necessarily the best at invoice discounting and visa versa. Factoring as much as providing cash flow is also about credit control and providing a debt collection service. Certain finance companies are geared up to chase customers debtors better than others. Also your geographic location must be a consideration. There are a number of smaller privately owned factoring companies dotted around the country.  These finance companies can provide a most excellent service however they tend to stick to reasonably locall based companies. There might be one of these companies close to you. It is worth getting us to check it out for you.

My bank wont give me invoice discounting

Tuesday, December 15th, 2009

Invoice discounting is only one of several invoice finance products available in the market place. Invoice discounting is mainly provided on a confidential basis and as such is commonly known as confidential invoice discounting. How it works is that  a customers will raise an invoice in the usual manner and post a copy to the finance company. the finance company will then make a percentage of the invoice available to the business typically 80%. All this can be viewed on line and different finance companies have slightly different systems and procedures when your customer pays you the finance company is repaid and a small fee is paid to the funder.

As  invoice discounting is quite a trusting way of operating a facility and is very much open to fraud and missuse any finance company requiring an invoice discounting facility  must be squeaky clean, be reasonably profitable, be very established and should have adequate systems and procedures in place. Therefore as most banks, in terms of underwriting, tend to be over cautious in the current climate and will shy  away from offering such facilities. A factoring facility will give the bank more control over the ledger as payments from your customers must be made direct to the invoice discounting company.

The good news is that there are a few alternative finance companies that will take a few. Most finance companies will put a customer on factoring and if they prove themselves then after a period of time they may allow the customer to go to confidential invoice discounting.   A half way house is for the finance company to  leave the credit control with the client however payments are made direct to the finance company. XL Business Finance has helped a number of businesses that have been refused invoice discounting via their banks however we have been able to help by providing a funder that will give the customer a chance on invoice discounting. If it doesn’t work they will put them on factoring.

Invoice Finance and stocking Finance

Monday, December 14th, 2009

Whilst we are still unaware of any finance company that will provides stocking finance on a stand alone basis there is still the odd one or two factoring company that can provide a true stocking facility on the back of an invoice finance facility. By the way if anyone can provide me with details of a finance company that provides stocking finance on a stand alone basis I would love to know.

A true stocking facility is one that will provide a percentage of your stock on a revolving finance facility. Don’t be fooled by a factoring or invoice discounting company that says they do stocking finance but will only advance up to an amount equal to a one hundred percent of your debtor book. Any invoice finance company that overlends on the back of a factoring or invoice discounting facility and requires repaying over a 6 month or 12 month is not providing a true stocking facility. All they are doing i9s providing a temporary overpayment which in the long run will not improve your cash flow. 

A true stocking facility will provide revolving stock finance facility against a prearranged prepayment. Again there a few finance companies to choose from however they are all very different lenders and which one is suitable for you depends on your own particular requirements and status. I also guarantee if you approach one of these lenders direct and they cannot provide a facility they won’t tell you who the other potential funder is. No way. XL Business Finance has been providing cash flow solutions to business for over 10 years. If you have an invoice finance requirement then we will be able to point you in the right direction. Based on a quick consultation we will be able to narrow down o two or three f the most appropriate finance companies. This will save you so much time and money. This service will not cost you a penny as a factoring or invoice discounting company will pay the introducer a commission for the referral. This is in no way added to cost of the facility as they will still need to remain competitive.

 
 
 

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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