Manchester 0161 980 0577
London 020 3301 4540


Archive for 2009

Invoice Finance in a recession

Wednesday, December 9th, 2009

The ability to raise cash against unpaid invoices is probably a more a necssity than a luxury in the current econimic climate. There are so many invoice finance  providers to choose from and it is imperative that you choose the right funding partner for your business. It is no point going with a finance company that provides a headline rate of 90% against unpaid invoices if they are very restrictive on individual credit limits and you only end up with 60% funding. XL Buusiness Finance has over 10 years experience in the factoring and invoice discounting market and can help your business find the most appropriate funding partner.

Any search on google will reveal millions of results for invoice finance. There will be banks , independent finance companies and brokers all vying for your business. An independent finance company is  an actual lender that is not bank owned,  whereas a broker is not a lender and will take a commission from the finance company for introducing you to the most appropriate funder.  During a recession it is important that you choose the right funding partner. An independent finance company will tend to be more flexible than a high street bank.  There are many independent factoring and invoice discounting companies and which one is most suitable for your business will depend on your geographic location, how long you have been trading, the quality and number of your invoices and whether you are profitable or not. If any part of your debtor book is contractual than there are only one or two finance companies which can potentially provide funding for your business.

As a rule of thumb if you need a factoring facility with full credit control we would not normally recommended a bank. The independents tend to be better at credit control and are normally better at collecting the debt. If your business is very profitable and squeaky clean then invoice discounting via the banks might be more beneficial. However for every high street bank we would be able to recommend another invoice discounting company that is bank owned but has their own autonomy.

Factoring with VAT and PAYE arrears

Tuesday, December 8th, 2009

As one of the UK ‘s leading independent finance brokers we have recently been asked to look at a number of factoring deals whereby  the customer has had some serious financial difficulties leading to VAT and PAYE arrears. At least one of these businesses was with another factoring company and at least one had no form of cash flow finance apart from a small bank overdraft. XL Businesses finance in both cases was able to find a flexible and sympathetic finance company.

With factoring it is possible to immediately release up to 90% of unpaid invoices. However there are so many finance companies offering these facilities. If your business has been struggling for whatever reason it is always best to get these issues out in the open. The worst thing you can do is is not disclose the full extent of many problems because most finance companies will discover any problems for themselves. This will rightly put the finance company on the back foot as they will view you and your business with an air suspicion.

VAT and Vat arrears is becoming more and more common place and whilst this is not ideal this doesn’t automatically exclude you from debtor finance. You might as well forget about finance with a high street bank and if you are already factoring or invoice discounting with a bank based factoring company you will probably find you have an unsympathetic approach from your bank.  This may result in reduced credit limits on individual customers and the   overall funding limit being reduced which obviously increases the problem further.

A more flexible approach from an independent factoring company can often result in more cash.  In addition there   are other financing options which can often help with cash flow. If your business operates heavy plant and machinery and industrial equipment a new invoice finance provider combined with refinancing of existing plant and machinery can provide much needed cash flow.

Business Finance for new start businesses

Monday, December 7th, 2009

It is still incredibly difficult for a new start businesses to obtain any sort of  business finance via the high street banks. The good news is that there are still a number of independent finance companies willing to provide funding, however they will do so very much on their own terms. It is slightly easier to obtain cash flow funding in the form of factoring or invoice discounting. The independent finance companies tend to be more flexible than the high street banks but there are a number of instances when we would recommend the banks for this form of finance.

Enterprise Finance Guarantee Funding or (EFG Funding) probably isn’t available for new start businesses. This form of finance is only rally available for businesses who have  good trading history, are profitable have a project that is viable form a rational and cash floe point of view however there isn’t enough security to enable the banks to make an offer.

Asset finance is available for new start businesses however as a rule of thumb only £10k of finance will be available for each director so long as a personal guarantee is available, the directors have a clean personal credit history and also have a reasonable amount of equity in their properties. Any new start business wishing to purchase assets costing more than £10k face a slightly more uphill struggle. I will tell you how in Mondays blog.

Arranging asset finance for a new start business

Sunday, December 6th, 2009

There are two ways of arranging asset finance for a new start business. Firstly you can go to your bank or secondly you can go to a third part leasing and hire purchase company.  Both options have their advantages and disadvantages. As an independent finance broker we have over 10 years of experience in helping businesses obtaining funding 

A bank will offer a certain level of finance for any new start business. If you are lucky you might get a token £10,000 of funding however you might have to wait a few months for a decision and if you get over a certain level you will be required to provide some bricks and mortar as security. In addition you will need to have provided an exceptional business plan and some pretty good cash flow projections. Can I really be bothered I here you saying!

Although arranging  asset finance via a third party leasing company is not as easy as it used  it can still provide a more flexible approach to getting a deal agreed. If you are a new start business it is very unlikely you will obtain finance from a high a street finance company.  The problem is that there are very few actually lending money at the moment. Most have battened down the hatches and the banks are only lending cash for asset finance deals to their own customers, and the long and well established ones at that.

The next tier of funders are more interested in the value of the equipment you are buying from a forced sale value point of view. If you are a new printing company and you are buying a printing press costing £100k and the press has a forced sale or trade value of £60k the very maximum amount of finance you can expect to obtain is £60k. Therefore  as a new  start business you would be expected to provide a £40k deposit.  A very unlikely scenario for most budding entrepreneurs. If you have enough equity in your house you might be able to provide additional security by offering the finance company a second charge over you r property.

Tips on arranging Equipment Finance

Saturday, December 5th, 2009

There is definitely evidence that things are picking up  in the finance and leasing market.  Well they are certainly in terms of businesses buying  equipment and requiring fiance. This time last year the industry went very quiet and has been really for the last 12 months. Businesses put capital expenditure plans on hold and battened down the hatches. Twelve months on and we are starting to get more asset finance  enquiries. Some of this might be out of necessity as vehicles and machinery  becomes uneconomical to keep repairing.  Or, it might be because businesses have the attitude that if we can make the investment work in the current climate we may as well crack on with it now because when things really pick up we will be well placed to take advantage of any upturn.  Great however until you go to your bank and cannot get any funding. In order to get the best possible chance of an approval for your funding requirements information must be presented to the finance company in the best possible manner.

XL Business Finance has over 10 years experience of arranging hire purchase and finance lease  facilities for our clients. Obtaining finance has never been more difficult. There are far fewer finance companies than there used to be and the ones that are left do not have an unlimited pile of cash. It simple supply and demand. Submit your application in the wrong way and it will just get  binned. The finance companies don’t have enough cash to be bothered with the marginal applications. Why should they bother lending money to the business that cannot be bothered getting up to date management information, doesn’t provide a rationale for the new aquistion or can’t be bothered providing bank statements. As an independent finance broker we understand the requirements of the different fiance companies and as such can add value to any capital expenditure projects.

Invoice Financing in a prepacked administration

Friday, December 4th, 2009

Like it or not we will probably see allot more pre packed administrations in the new year. Word from the insolvency practitioners is that the inland revenue and customs and excise are taking a tougher approach on PAYE and VAT arrears.  With the traditionally quiet Christmas period and allot of businesses already struggling ,  I think we will potentially see a few more casualties as businesses cecome  even more strapped for cash.

A prepacked administration is basically a deal whereby the business goes into administration and the following day a new company is set up to purchase the assets of the administrator.  In the process the business potentially dumps a load of debt and should be more viable moving forward. Providing factoring or invoice discounting in such a process is a very specialist area and it is advisable to chat to a good broker as to which finance comapny weill provide the best funding.

 I believe it can be argued justifiably for and against a phoenix company. On one hand why should any financial institution support a business which has gone bust and potentially has caused financial pain and grief to its creditors. On the other hand a phoenix business is potentially a leaner and meaner organisation , has a much better chance of trading profitably and will have saved a few jobs in the process.

Invoice financing in a prepacked administration is quite a specialist area and there are only a handful of financial organisations which can truly finance a prepack.  The idea is that an  invoice discounting company will take out the existing finance company prior to the pre pack. In ding so it ensures that an administrator   is on the side of the directors.  The new finance company will collect the debt from the old co and will in theory seamlessly finance the new co as well. A bank for example will appoint their own administarator and as a rule of thumb they wont provide a factoring or invoice discounting facility for the new co.

Bank switching overdraft to invoice discounting

Thursday, December 3rd, 2009

There are some very simple reasons as to why a bank would withdraw an overdraft facility. Firstly a bank will feel that they have more control over an invoice discounting or factoring facility. If a business has been in difficulties there is a trend to reduce overdrafts or even withdraw them completely. Secondly  one of the criticism that have been pointed towardsthe banks in the aftermath of the collapse in the banking system is that the banks are under capitalised. This means that  the banks were supposed to have a certain amount of cash reserves, which they didn’t. Indeed the propping up of the banking sector provided the banks with more cash however most of this cash has been used to recapitalise their balance sheets. Interestingly if a bank lends money on an overdraft they are supposed to have a greater amount of cash reserves than if they had lent the same amount of money against a factoring or invoice discounting facility.

One of  the biggest enquiries  we get is from businesses wishing to protect their working capital in the event in a reduction in overdraft. Whilst banks offer such facilities I find it very strange that a business should even contemplate an invoice finance facility with the same bank which is restricting their working capital facilities. We genuinely believe that for most financial products offered by the banks their is a far superior product offered by an independent specialist provider. Although there are so many independent factoring company, at XL Business Finance we use our expertise and experience to recommend two or maybe three funders that will best suit your requirements. As the going says one mans poison is another mans meat. It is the same with finance companies. We will take into consideration your geographic location, length of time the business has been trading, turnover , size and quality of debtor book, profitability and whether their is any previous or historic adverse credit information.

Bad debt factoring

Wednesday, December 2nd, 2009

Bad debt factoring can provide the financial freedom of releasing cash against unpaid invoices, a full credit control function and bad debt protection rolled into one!  Ninety percent of businesses go out of business because they run out of cash and not because they are not profitable. In the current economic climate it make sense to out source your credit control to leave you free to concentrate of running  your business. If your business has a turnover of circa £100,000 your business will probably be eligible for funding.

Factoring will release up to 90% of your unpaid invoices immediately therefore if you have outstanding invoices of £1.0m it may be possible to release £900k immediately. It doesn’t matter how long the business has been trading or the financial condition of the business there is normally a business to suit your particular circumstances.

A full factoring facility will start from as little as a couple of hundred pounds per month. Be beware however not every factoring company is the same. Banks for example will only chase your top few customers by phone relying on the post to chase your remaining customers.  Other factoring companies will chase every single customer by telephone and as such are they are better at collecting your invoices. They will give you the best cash flow. These finance companies can be more expensive but they can potentially add more value to your business.

Bad debt protection or on recourse factoring can also be added for a premium. Again different finance companies are better than others at providing bad debt protection. Different funders use different means to provide bad debt protection and the limits they are set are based on the credit insurance companies providing limits for you customers. In order to find out which finance company is best for your business give us a call for an independent assessment.

Non recourse invoice discounting

Tuesday, December 1st, 2009

Imagine the financial flexibility of invoice discounting combined with the added benefit of bad debt protection. It is no wonder that seventy five percent of the enquiries we get are from customers wishing to insure their debts. However as with any factoring or invoice discounting,  there is so many different financial institutions to choose from. XL Business Finance has been helping customers choose the most suitable funding partner for over ten years.   

Non recourse is the same as bad debt protection and can be offered as an add on by most invoice discounting providers.  Pricing generally starts at between 0.45% of turnover and can be high as 1%. This is addition to the normal discounting charges.   As with any form of debtor finance it is important that you choose the right finance company to fund your business.  It is no pointy in going for the cheapest bad debt protection if you are not getting the appropriate level of funding.  An independent invoice discounting company may use a number of different credit reference agencies to set credit limits whereas a bank will use their own in house insurers. It is worth getting an independent broker to check out a few alternatives. Also beware we have seen some banks recently setting quite high individual credit limits only to take it away by capping the overall facility. Certain independent funders will also go the extra mile to get the best possible funding limits.

Independent  Generally speaking 80-85% of  of the value of your invoices can be released immediately. Invoice discounting can be either confidential or disclosed however the credit control remains with the business. From the finance companies point of view this facility is more risky than factoring and as such any finance company offering such a facility will carry out an audit to make sure the correct credit control systems and procedures are in place.

Single Debtor Invoice Finance

Monday, November 30th, 2009

It is now possible to obtain one off factoring against a single debtor. One finance company has entered the market whereby once you are set up with the finance company you can pick and choose which invoices you  factor.

Needless to say this facility will not work if the debtor is of a poor quality and has  a bad credit rating. Single debtor invoice finance can sit alongside other banking facilities however it wont work if  you are already factoring or invoice discounting.  A single invoice can be discounted at any point up to 90 days of it being issued. The minimum size invoice that can be discounted is £5,000 and there is  an initial  minimum charge of 5% for the first 21 days that the money  remains unpaid. Depending  on the remaining number of days the invoice remains unpaid a small amount accrues on a daily basis over and bove the initial 21 days.

This facility can be used for a one off invoice however it can also be used as as little or as often as you require. There is no on going fee just the standard charges and and when you decide to factor your invoices. The advantages of this kind of funding are obvious particularly for those businesses not wishing to be tied up for a full factoring facility. In addition if  a business finds its self using the funding more and more often then it is possible to switch to a full factoring or invoice discounting facility.


Sovereign House,
Stockport Road,
Cheshire SK8 2EA

How to make a complaint | Privacy Policy

0161 980 0577

020 3301 4540

XL Business Finance Limited are authorised and regulated by the Financial Conduct Authority FRN 718737

Get A Quote

Get in touch by filling in the form below. One of our finance experts will get back to you as soon as possible.

    This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.