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Overdraft withdrawn when switching to factoring/invoice discounting

Monday, July 20th, 2009

If you are considering switching to a factoring or invoice discounting facility it is worth considering the implications this may have on any available overdraft facility.  It is more likely than not that a bank will have taken an all assets debenture against the company. This means that their security is the debtor book of the company. Therefore when considering an alternative cash flow product there must be enough flexibility in the headroom of the factoring or invoice discounting facility to fully repay the overdraft and provide additional working capital. Any bank informed of a customers intantion to use a factoring facility in my experience will require the overdraft repaying in full. Remember an overdraft facility is repayable on demand.

I have also seen customers being caught out wanting  to switch a factoring facility away from a bank to another independent factoring company. They have forgotten or not realised the bank has an all assets debenture registered against the business to secure a small overdraft. Before the customer can switch the overdraft will need to be paid off but it can often be the  customer doesn’t have the headroom to repay the overdraft. Sometimes it may be possible to get a small over payment from the new factoring company or it may even be possible to refinance existing equipment to repay the overdraft and provide additional working capital.

 
 
 

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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