When it comes to organising a factoring facility there are basicLly two choices a bNk owned factoring compnay is a decision of the bank but as we know the banks try and be all things to all men And they don’t necessarily five the best service. A independent factoring company is a business set up independently from the banks and they usually specialise in factoring alone and As such their service is second to non.
FActoring is all about adding value in terms of providing the most possible cash against your unpaid invoices. It is also about collecting your cash within 90 days in the most efficient and professional manner.
Therefore cheapest is not always best. There is Absolutely no point going with the cheapest quote if that particular finder cannot get the cash through the door . For example a number of bank operated factoring companies will only telephone your top ten customers and leave the rest to chance or to letter.
At XL Business finAnce we have plenty of experience in pointing our customers in the right direction. We would recommend no more than two or three ompanoes that will best suit your particular requirement. The companies that we recommend will be selected based on your location, turnover, quality of debtor book, length of time trading and profitability. Our recommends will be very similar in terms of business they are looking for but it will come down to personalities as go which one you choose. As soon as you start seeing more than two or three companies they will not all take you seriously and as such you may not end up with the best possible deal.
Archive for April, 2010
Independent or bank owned factoring company
Friday, April 30th, 2010Factoring Contractual debt
Thursday, April 29th, 2010During the last week we received an enquiry via our website from a furniture manufacture needing to refinance some existing equipment to provide cash for working capital. Unfortunately the age of the kit meant that the value for refinancing purposes was very low and would nit provide enough cash. On digging a bit deeper it transpires that the customer had been told that they could not use factoring or invoice discounting and as such was struggling for working capital. Businesses which are involved in the construction industry or any other contractual business obtain payment upon application of work to date rather than by invoice. Whilst non of the high street banks are able to fund such applications the good news is that are one or two factoring companies that can indeed fund these applications. They have their own in house surveyors that have experience in all industries and they can verify that the applications are reasonable and accurate.
This is a very specialist area and as such the to funders who can provide such funding are very different financial institutions indeed. Which finance company is best for your business depends upon your own businesses individual circumstances. A brief survey of your business will help us to pint you in the right direction. Much of it will depend on the length of time you have been trading, how profitable the business is , turnover and the quality of your end customers. XL Business finance as 10 years experience in helping such businesses. Give us a call today!
A guide to financing new equipment and machinery purchases
Wednesday, April 28th, 2010At a time when many of the high street banks and finance companies are still difficult to deal with it is imperative than any application for hire purchase or leasing facilities to the few remaining finance companies are presented in the best possible format. At XL Business finance we have over ten years of experience and expertese in organising competitive finance facilities for a variety of businesses. The following will give you an idea of the type of information that we will collate and present to the finance company.
1. We will require the last full set of audited accounts. We will need every single page and not just the most recent profit and loss and balance sheet.
2. We will require the most recent set of management accounts . If there has been more than twelve months since the last set of full audited accounts we will require management accounts to the next full year and also the most recent set thereafter. As a minimum we will require a profit and loss and balance sheet. Any finance company will require the most up to date information that is available to ensure that the performance of the business is adequate for their requirements.
3. No matter how big the deal is three months bank statements will help to evidence serviceability. If three months clean bank statements can be provided then this is always be a massive positive in term of evidencing serviceability.
4. Confirmation of working capital facilities will also be useful. A copy of the bank overdraft or factoring facility letter is also a good idea to include
5. Background information will enable the underwriter to understand where the business has come from and the future plans
6. An aged debtor report will evidence the quality of your customer base
7. Most importantly we will need to provide a rational for the purchase. Is the kit replacing old kit? Will turnover increase, labour savings be made or margins increase. It is always useful to know of any existing finance agreements coming to their end which again will evidence serviceability
8. Are personal guarantees available if any
9. Is there any other security available such as unencumbered kit or property which may help to increase security levels?
Success in finding finance for a new printing press
Tuesday, April 27th, 2010Last week XL Business finance was approached by a London based printing company that needed finance for a second hand print ppress costing approximately £80,000. Although the business was profitable and there was a strong rational for the purchase the deal did not tick all the right boxes for a high street finance company. A well known print finance company was fully exposed at around £250k and were unable to advance an further funding. We received the enquiry via our website and very quickly we were able to secure a hire purchase facility with a privately owned leasing company. This is a prime example as to how a asset finance broker can add value when it comes to organising hire purchase and finance lease facilities.
XL Business Finance has been helping similar businesses for over ten years and as such we have developed a reputation as one of the leading finance brokers in the country. At a time when many of the high street funders are still reluctant to bring up the shutters we can source alternative funding arrangements. Dotted around the country there are many independently owned leasing countries that all have a niche which can accommodate most situations. In addition many of these finance companies will not accept deals from any old asset finance brokers. Unfortunately there are a few bad uns that give us good uns a bad name. Many of them are inexperienced retired bank managers that don’t know how to structure a deal. In order to have the best possible chance of getting your deal agreed make sure that the broker you are using is experienced and has an asset finance background
Invoice Financing Explained
Monday, April 26th, 2010The ability to obtain cash against your unpaid invoice can have a massive affect on your businesses cash flow and hence your ability to trade. Invoice financing is the generic term for factoring and invoice discounting both of which will release up to 80% of your unpaid invoices. The remaining 20% is paid when your customer pays you less any charges due to the invoice discounting company. As cash becomes more and more tight we understand that credit terms are being stretched further and further. Invoice financing is the perfect solution to ease your Cashflow and unlike a bank overdraft the facility is not repayable on demand and will grow with your business.
However there is a subtle difference between factoring and invoice discounting. Whilst both products release cash against your total debtor book factoring usually provides credit control as an additional service and invoice discounting is usually provided on a confidential basis. Which facility is best for your business depends on your own requirements and trading performance. XL Business Finance is one of the countries leading factoring and invoice discounting brokers and we have been helping businesses for over ten years obtain the most appropriate funding partner. You wouldn’t go to your butcher for open heart surgery so why go to your bank for finance advise. We believe that we are more qualified and better placed to help a business choose the best funding partner.
As invoice discounting is usually provided on a confidential basis this means that your customers are unaware that you are discounting your invoices. The finance company is unable to call your customers and verify the amount of your invoices. therefore invoice discounting is deemed to be a more risky facility and as such is usually only available for profitable more established businesses that have th necessary controls and procedure in place. Factoring however is conducted in a more open way and as such the finance company can call your customers to check invoice amounts and as such it is a facility more widely available.
Why should you use an asset finance broker
Friday, April 23rd, 2010To ensure that you get the best possible deal when financing your capital equipment you should use a well established and reputable asset finance broker that has been around the block a few times and knows and understands the leasing and hire purchase market. Beware of the retired or recently made redundant bank manager as they have absolutely no idea what is available or achievable in the asset finance market. As one of the countries leading asset finance introduces we know exactly which finance companies finance what sort of assets for what sort of businesses.
Whether it is a £1.0m refinancing of existing plant and machinery or purchasing a £5k multi function copier XL Business Finance has numerous funders with cash wanting to do deals. These might not always been well known high street funders however there are still finance companies in the market today wanting to deals. As with any sort of finance they all have their sweet spots and they expect any proposals to be put them in a way that makes them easy to understand. It maybe also that they don’t need as much info as you would normally expet a bank to require. We can certainly get a handle as to what is achievable very quickly indeed without the need for expensive business plans and projections. Allot of the time it comes down to the sort of asset and what other security is available.
And remember that finance is a risk reward business so if your business has been trading for less than three years , has an insolvent balance sheet or has shad a difficult period of trading don’t expect bank rates!
Invoice Finance or bank overdraft for an SME
Thursday, April 22nd, 2010It appears that a bank overdraft as a means to financing a businesses cash flow requirements is becoming second place behind invoice financing. For starters it appears to be more and more difficult to obtain an overdraft. For many businesses it may be that they can obtain a token amount of £10-£20k and this may depend on the length of time a business has been trading and whether it is profitable or not.
An invoice financing facility such as factoring or invoice discounting is secured against the unpaid invoices of the business. As a rule of thumb you can obtain 80% of your unpaid debtor book on a revolving credit facility. Therefore as your business expands so does the size the available facility. And it doesnt matter how the performance of your business fluctuates it is not repayable on demand.
The problem with a bank overdraft it is repayable on demand. Up until the last year or so it was virtually unheard of for a bank to withdraw an overdraft. Not any more . We are often hearing of situations whereby an overdraft is being reduced following a poor set of results. This will never happen with an invoice financing facility which isn’t repayable on demand. In addition once you get on with a bank overdraft it may be difficult to move away. The bank may offer you a factoring or invoice discounting in addition to your bank overdraft however we often see the total facility being restricted. You may find that you may have had more funding using an independent factoring company or invoice discounting facility that specialise in invoice financing. Beware!!!!!
Invoice Finance explained
Wednesday, April 21st, 2010We had a request yesterday from a web development company wanting some form of invoice finance. They had aboiut fifty customers on twelve month contracts all of which paid a ten percent deposit on the work to be done and then on a monthly basis thereafter. They were invoicing at the beginning of each month for the work to be carried out for the following month. Invoice financing only works for work that has already been carried out and that is being invoiced with credit terms of thirty, sixty or ninety days. Although we were not able to help we put this enquirer in touch with a company that can offer contract finance , a totally different product.
Invoice Finance can either be in the form of factoring or invoice discounting. As a business you provide goods or services to your customers and provide credit terms. Invoice finance provides immediate cash of up to 80% of these unpaid invoices on a revolving credit basis. Whether it is factoring or invoice discounting that you desire as son as your customer payd the outstanding invoice you receive the remaining 20% of the invoice less any charges.
Factoring provides crdit control in addition to the cash and is provided on a disclossed basis so theat your customers are awrae that you are factoring your invoices. Becauseth the factoring company is able to verify invoices this form of funding is also available for new start businesses, insolvent or businesses that have been struggling
Invoice discounting is provided in a confidential manner and as the finance company is unable to verify invoices this form of invoice finance tends to be made available for established businesses with a good performance history who are unklikely to take the invoice discounting company for a ride.
XL Business Finance has years of experinec in helping businesses choose the right invoice financing company for their particular needs
Benefits of using an asset finance broker
Monday, April 19th, 2010Any business wishing to purchase plant and machinery will know that the banks at the moment are not the most accommodating when it comes to asset finance. During the credit crunch any independence the bank owned leasing companies had will have been pulled back in under the umbrella of the main bank. What this means is that now there very little difference in applying for a commercial bank loan or a hire purchase or leasing facility. Indeed you will find that your application for either will probably go to the same underwriter for approval. Never has it been truer that the banks will take into consideration you overall exposure when approving any type of borrow including any outstanding finance lease facilities.
Although credit is hard to come by never has the benefits of an asset finance broker been more important. There are still one or two independent leasing companies in the market that can compete with the big banks. So long as there is not a massive difference in the cost of borrowing why use potential valuable credit lines for purchasing assets and equipment. In deed certain banks will not provide finance lease or hire purchase facilities under £100k preferring to provide loan facilities. Whilst you may think this is the easy option commercial loans do not have the same tax advantages of leasing. For the sake of taking a little effort now it will possibly give you massive benefits in the future.
XL Buisness Finnace is one on the countries lading asset finance brokers and with over 15 years experiance we know all the UKS fiannce companies. All have different sweet spotys and all do things inslightly differing ways . We have the experience and experetese to ensure the best possible funding solutions are sourced for your particulr business.
invoice discounting vs factoring
Sunday, April 18th, 2010And the winner is! It depends!
Both an invoice discounting and factoring facility will release up to 85% of your unpaid invoices on a revolving credit basis. In theory both facilities will grow as your turnover increases providing you with valuable cash and working capital. In our opinion both are far better than a bank overdraft which is not as flexible and will be capped depending on how profitable or the level of security available.
Both factoring and invoice discounting charge an interest rate for the amount of money that you borrow which is comparable to a bank overdraft. If you don’t use the facility than there will be no interest payment. The rate of interest may vary from between one and a half percent over base to as much as three percent over bank base rate. Some finance companies charge their interest rate to Libor which at the moment doesn’t make much difference because both are about the same. Beware some finance companies charge a minimum base rate so you need to double check the small print.
The main difference is that factoring provides credit control whereas invoice discounting is provided in a confidential manner and provides a cash flow facility only. As such the service fee with a factoring company is usually higher than with invoice discounting. With factoring they will call your customers and ensure that payments are received within the ninety days permitted. Although the costs of factoring his higher for smaller businesses compared with the cost of outsourcing credit control it can be a very cost effective form of finance.
However if you are a new start business, have a small net worth or are having trading difficulties you are unlikely to be offered invoice discounting. This is because invoice discounting can be susceptible to fraud. As invoice discounting does not enable the provider to do any checks there have and will be cases of fresh air invoicing.
