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Archive for March, 2010

Is Leasing equipment cheaper than hire purchase

Sunday, March 7th, 2010

Many businesses contact us assuming obtaining leasing facilities for new equipment will be a) easier to obtain and b) cheaper than a traditional hire purchase facility. The answer is monthly repayments and ease of obtaining credit is exactly the same. The only difference being slightly different tax treatment. Which finance facility is best for your business depends on your own requirements and preferences.

In both cases the supplier will expect full payout of their invoice and therefore the hirer will be repaying the full cost of the equipment plus interest wheher it is hire purchase or finance lease.  The differing tax treatment is as follows.

With hire purchase all the VAT is paid up front and at the end of the final payment legal title passes to the customer. The equipment is shown in the customers balance sheet as an asset with a corresponding liability for the hire purchase element. The asset or equipment  is written down on a reducing balance basis and as  much as 50% of the capital cost of the equipment can be claimed  in the first year. Therefore  hire purchase may be more tax efficient in the first year especially if the business is making large profits.

With finance lease the vat is spread over the term of the lease agreement therefore from a cash flow point of view it can help businesses that are short of cash. Instead of claiming writing down allowances the monthly payment is offset in the profit and loss account and as such the full taxable benefit is obtained in exactly the same number of years of the term of the agreement. The big disadvantage of a finance lease facility is that the hirer cannot get direct title at the end of the agreement. A finance lease agreement will kick into secondary or peppercorn rentals usually the equivalent of one months payment on an annual basis. Title is usually obtained by selling the goods to a third party and retaining 90-95% of the sale proceeds.

Grants for Business Investment

Wednesday, March 3rd, 2010

If your business is planning to invest in capital assets (ie plant and machinery) and/or new staff for expansion, rationalisation or diversification then your business could be eligible for a grant. If the project is yet to start and the your business serves or plans to serve more than a local market than European Grant monies may be available. XL Business Finance has teamed up with a specialist firm of chartered accountants to provide a free assessment of your eligibility for a grant. The initial assessment is absolutely free and a fee is only payable on the successful draw down of a grant.  No grant no fee!

The minimum grant available is  £10k and provided that all other areas of funding have been exhausted then funding may be awarded for between 10-35% of the total project cost therefore other sources of business finance must be secured to prove that the project is financially viable.

Following an initial meeting and a draft a project proposal which is discussed with the funding body and we get feedback within 2/3 days as to whether or not the business is likely to be successful with a grant application. It is important that you use  the best possible expertise and experience in making sure that the application is dealt with in the correct manner to obtain the best possible chance of success. It is  possible to go though the process yourself however experience suggests that it is better leaving it to the experts. From start to finish the process should take no more than six weeks however a business left to their own devices may take as long as six months wasting time energy and money. Far better to take the money now pay someone to do it and avoid making a mistake which leaves your application worthless.

Any business which has applied for the ECFG funding and has been declined may find a greater chance of success with the possibility of a grant. XL business Finance has over 10 years experience in providing innovative funding solutions and this is just one of the many areas we may be able to add value to your business.

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.

Asset Finance in an MBO

Monday, March 1st, 2010

Amongst all the turmoil of the last eighteen months we are still seeing one or two opportunities to fund management buyouts.  This makes a change from the business going bust and new directors and shareholders  buying  the business off the administrator. In terms of providing funding there are fewer options than there were before the credit crunch however asset finance is becoming more and more prominent as a option to top up other types of funding.

Once upon a time you could go to many high street business banks and obtain a cash flow lend against the turnover and the profitability of the business. The amount that could be borrowed bore no resemblance to the individual assets of the business, mainly buildings , debtor book and plant and machinery. It was once possible to obtain funding much higher than the total worth of all these assets. These sorts of loans are virtually impossible to come by nowadays because many of the banks have had their fingers burnt as business have failed during the recession leaving the banks highly exposed.

Nowadays it would appear that traditional asset based lending would be the way forward. A commercial mortgage, factoring and invoice discounting and a bit of asset refinance to top up the facilities. If the vendor requires any more cash than it is usually done by way of deferredpayments. However asset finance and asset refinance is playing a more and more important part of the MBO process. It is important that an asset finance specialist can provide the best possible options for refinancing your kit. There are various finance companies that specialise in engineering , printing and commercial vehicles and they use their own experiences and supplier network to value equipment . There are also a number of general funders that use professional valuers to obtain valuations for refinancing purposes. At XL Business Finance we use our knowledge and experience to make sure the best possible option is provided for your business.


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 Limited are authorised and regulated by the Financial Conduct Authority FRN 718737).

XL Business Finance, Eaton Place Business Centre, 114 Washway Road, Sale, Cheshire M33 7RF UK.


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