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Can I obtain Stocking Finance

Wednesday, February 9th, 2011

The answer ( as with anything ) is MAYBE! Stocking Finance traditionally is an add on to a factoring or invoice discounting facility. It is sometimes possible to obtain funding in the form of a stand alone facility from an independent trade finance company and of course for the right sort of customer it is possible to obtain funding via your own bank. The following article will hopefully give you an idea as to where your business sits in terms of funding options.

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.

Stocking Finance explained

Tuesday, November 2nd, 2010

There are a number of variety of stocking finance options and depending on your particular circumstances there are a number of different products. Depending upon the the finance company you approach these different products may be called something completely different from one finance company to another.

Firstly let me explain we are unaware of any financial institution that offers stocking on a stand alone basis. It is usually provided with another finance product.

The most common form of stocking finance is provided on the back of a factoring or invoice discounting facility. A true stocking facility will provided a a percentage of the total monthly stock on a rolling contract. Beware certain invoice finance companies offer stocking finance but t is only to provide additional security to enable them 10% of your debtor book. Whilst funding in this instance  is technically stocking finance the over payment will be reduced over a period of time. There are only a few invoice finance companies that offer the full rolling stock facility and therefore it is worth giving us a call to check.

Stock finance may also be provided as part of a trade finance agreement. Where a business has confirmed orders it may be possible to obtain 100% funding from start to finish. This can either be on a domestic basis or on an international basis. An international trade finance facility will enable a business to import goods and where there are confirmed orders finance can be obtained from start to finish. When the goods are delivered to your customers premises a factoring or invoice finance facility will dovetail with the trade finance facility and provide seamless funding. Therefore technically speak international trade and domestic trade finance could be viewed as stocking finance as well

Invoice Finance and Stocking Finance

Tuesday, March 2nd, 2010

At a time when it is becoming more and more difficult to obtain working capital through traditional banking facilities many businesses are looking to alternative and possibly more flexible form of finance. Invoice finance combined with stocking finance is an asset based finance product that can provide additional working capital over and above traditional invoice discounting and factoring facilities.

There are very few invoice finance companies that will offer a true stocking facility. There are some that they say provide finance against stock but it usually on the back of a factoring or invoice discounting facility to provide no more than 100% of your debtor book. In addition the loan or overpayment is only on a short term basis that will need repaying over a relatively short period of time. However there are definitely two or three UK based invoice discounting providers that provide a true revolving stocking facility. Again this must be provided in conjunction with the factoring or invoice discounting facility. As far as we aware there are no finance companies that will provide a stocking facility on a stand alone basis.

How much of a facility you can obtain against stock depends on the type of business you are in, how specialist the product is and the potential market for the stock. As a rule of thumb expect to get no more than 30% of our initial outlay. We are looking at a invoice discounting and stocking facility for one customer at the moment and their total stock is in excess of £2.m can potential provide a facility oF £600k over and above the 85% debtor book. This will provide much more working capital than the bank can ever provide and as such is known as a no brainer!

 

To make sure you are speaking to a funder that provides a true revolving stocking facility give XL Business Finance a call today and we will point you in the right direction.

Bank restricting my invoice discounting facility

Wednesday, February 24th, 2010

Ok, I know I keep harping on about the banks and potentially having too many eggs in one basket however we have recently come across a situation which shows the banks for what they truly are.

Approx 12 months we were approached by a engineering company with a turnover of approx £12m to help source a competitive invoice discounting facility. They were banking with a well known high street bank that shall also remain nameless. A commercial mortgage was in place with the same bank for approx £500k against a fairly recent valuation of £1.1m so plenty of security here thank you very much. We recommended a totally independent invoice discounting company so the bank wouldn’t have too much control. The cost via the independent would be appox £30k of service fee for running the facility compared with what the bank who were offering the facility at a loss leading £12k per annum. From a cost point of view a no brainer however if trading conditions were to take a turn for the worse this could leave the customer exposed to the mercy of the bank.

Now then 12 months down the line and because one of the group businesses have struggled the customer has been placed with the banks specialist care unit and as such is facing massively increased costs.

The service fee has been increased by 1%,  the interest rate has been increased by 0.75% and a monthly management fee of £1200 per month for monitoring the business has been applied. In addition a one of fee of £10k is being charged to verify the management information and cash flow projections. All this adds up to a whopping additional £50k per annum. Ouch!

Although this business has a £100k overdraft facility they are currently running stock at £2.5m. Within in two weeks we expect to have the customer uplifted from the bank with a new invoice finance company complete with a revolving stocking finance loan providing the business with an additional £200k working capital even after paying off the bank overdraft!

Invoice Finance and stocking Finance

Sunday, February 7th, 2010

Invoice Finance can potentially provide so much more. As we know a factoring and invoice discounting facility will release up to 85% of a businesses unpaid invoices. In the very difficult period of obtaining cash flow from the banks it is important that a business obtains as much benefit from their invoice finance facility as possible. Obtaining stocking finance on the back of an invoice finance facility might provide your business with the additional working capital required to make the difference between success and failure. Not all stocking facilities are the same and XL Business finance has over 10 years experience in helping businesses find the right funding solutions.

At the moment there are no finance companies providing stand alone stocking facilities. Any stock finance is provided on the back of a factoring or invoice discounting facility. However beware there are only one or two funders that provide a true revolving stocking facility. Most invoice discounting companies suggest they provide  finance against stock however what they actually do is provide a further advance up to 100% of the debtor book using the stock as the additional security. In addition they claw back the overpayment over a 12 month period for example. A true revolving stocking facility will provide a percentage of the total stock in addition to the agreed prepayment against the debtor book.

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.

Stocking Finance

Wednesday, August 5th, 2009

Enquiries regarding stocking finance seem to be on the up. As businesses find the high street funders more and more difficult to deal with, managing directors and finance directors are continually looking for innovative ways to help with cash flow. Stocking finance is a facility normally used in conjunction with a factoring or invoice discounting facility however in cirtain circumstances it can also be funded on a stand alone basis. Not all funders do proper stocking agreements and here’s why! 

Most factoring or invoice discounting companies will tell you they can fund stock. They will only do it in conjunction with a factoring or invoice discounting facility. In addition these finance companies will only fund stock as an overpayment up to amount equal to 100% of the debtor book. For example if  a business is obtaining prepayments at 80% and the debtor book is at £100k a typical factoring or invoice discounting facility will generate £80k against the value of the invoices. The maximum amount they will be able to generate from stock is therefore £20k being the difference between the total debtor book and the prepayment amount. More often than not stocking finance can not be obtained on a revolving credit basis and the intitial loan is normally clawed back over 12 months from when the advance was made. A factoring company will use this overpayment secured against the stock to win new business or help the business with a one off project.

There are however a few funders that provide a true revolving credit facility secure against stock.  These funders are few and far between but they doexist. Depending on the turnover, profitability and length of time the business has been trading will determine which funder we will recommended.

We also know of one funder that can potentially finance stock on a stand alone basis however as you can imagine the business would need to be well established and profitable. It may be possible to get 30p in the pound however as min facilities would be in the region of £300k a stock value of around £1m would be required.

Matching Clients With Factors

Thursday, July 23rd, 2009

As a leading independent factoring and invoice discounting broker it is important we match the most appropriate factoring company with our potential clients. XL Business Finance use over twenty different finance companies that all have a different criteria in terms of the clients they are looking for. The main paramiters which we work to are.

Is factoring or invoice discounting required? As a rule of thumb some of the independents are better at factoring than the bank owned factoring companies. This is because factoring for the independents is their main core activity. They will go the extra mile in terms of chasing your customers. An independent specialising in factoring is more likely to chase and phone all your customers. Although cost must be important factoring is more of a value added service and as such you tend to get what you pay for.

Turnover. This very important because different factoring companies are comfortable in a certain turnover range. Some factoring companies specialise in the small business sector to provide that extra personal touch. XL Business Finance can advise which factoring company will best suit your particular needs

Location. Different factoring companies have a strong presence in different geographical locations. XL Business Finance can advise as to which factoring companies are best in your particular area.

Market Sector. Different factoring companies can have a particular niche in certain market segments. Certain factoring companies are very good at haulage or printing for example. It all depends on their particular experiences of the different market sectors.

Finally Product. Some factoring companies can provide stocking finance in addition to the debtor finance, others are good at international trade. Some are good are good at contractual debt.

XL Business Finance can save you the time and expense of locating the most appropriate funder

Stocking Finance

Wednesday, May 27th, 2009

Traditional it has only been possible to obtain stocking finance in conjunction with a factoring or invoice discounting facility. It has come to our attentiona that there are one or two specialist funders willing to look at stocking finance on a stand alone basis!

 
 
 

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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