Asset finance leasing - XL Business finance

Invoice factoring a new start business

April 8th, 2010

It was once said that eight  out of ten businesses went bust not because they were not profitable but because they ran out of cash and were unable to manage their cash flow adequately. Any new start business will probably go to their bank as a first port of call and try and arrange a bank overdraft. If you have a sympathetic bank manager and if he likes you allotyou might get a £10k facility. Anything over and above that they will want personal guarantees , register a debenture over the business and will need to take a charge over your personal property providing you have enough equity.

The next obvious step for additional working capital would be to apply for an invoice factoring facility which will release up to eighty five percent of your unpaid invoices. Now in our opinion the banks are not the best at providing factoring to new start businesses. You will be a very small fish in a very large sea and as such service and accessibility may indeed frustrate you somewhat.  However because you have a small overdraft and a debenture registered you will be railroaded into using the banks in house factoring company because to use a third party funder you will need to repay the overdraft to get the debenture released. A debenture is a fixed and /or floating charge over the book debts of the business. Any cash flow facility either invoice factoring or overdraft will require that the lender has a debenture.

Ok the bank would seem the obvious choice however as soon as the business starts to grow you may find that your overall limit is restricted and you end up with less cash with the banks overdraft and factoring facility compared with a independent factoring facility who traditionally will fund your invoices to a higher level. In addition as your turnover starts to grow the problem increases further whereby it is difficult to get cash. You then start looking around for a more flexible funder and hopefully in the meantime cash flow isn’t affected beyond repair.

Leasing Printing Equipment

April 7th, 2010

XL Business Finance has certainly got a great deal of expertise and experience in financing printing equipment.  Depending on the type of equipment that needs financing a slightly different approach may be required. For example a company specialising in financing printing equipment will not usually finance digital printing equipment. 

A print finance specialist is only interested  in the forced sale value of the kit and they will know their exit route in the event of a default situation. They will have a network of dealers and suppliers and even end users that they can shift kit onto. For a business purchasing traditional litho equipment a print finance specialist can certainly add value to any business. They are not hung up with the balance sheet of the business but are more interested in the serviceability and the security in the kit. Therefore a business which is loss making or even is a new start business may be able to obtain finance lease or hire purchase facilities. And if you have a particular press in mind they may be even be able to source a repossession or find a part exchange on another deal they are working on.

This is contrast to digital printing equipment which is viewed as having very little or no security.Therefore first port of call will be a balance sheet lender or high street finance company. providing your business has a at least three filed accounts , is very profitable and has a very strong balance sheet you will have absolutely no problem obtaining finance. Of course every single business is trading exceptionally well at the moment , NOT!  There are a few finance companies that will take a view on these sorts of deals but if they are not at the races it will be very difficult to obtain funding without personal guarantees!

Invoice financing contractual debt

April 2nd, 2010

Approach most invoice financing companies for a factoring and invoice discounting facility and as soon as they realise there is an element of contractual debt they run a mile. The good news is that there are one or two finance companies that specialise in financing contractual finance.

They are two completely different finance companies. One is a bank owned invoice financing company and the other is an independent based invoice discounting company. ie they are not bank owned. Compare any of the two quotes and you will probably find the bank owned invoice discounting company is slightly cheaper. However in our experience the bank owned finance company may not give the best service. Being a bank you will probably find they have more inexperienced staff. Not say they all are but it will be pot luck as to the level of service you obtain. The bank will probably quote a higher pre payment but as we know with any part of contractrual invoicing what you invoice isn’t necessarily what you get paid. This is where the problems start. A larger financial institution will have greater difficult reconciling payments and you end up with disallowed invoices and possibly less cash in the bank

Whilst no one funder is perfect the independent will understand that payments coming in through the door do not always match up but they have a far greater experience in reconciling the accounts. It might also be that whilst the independent quotes a lower prepayment you end up with far more cash in the bank. The independent will base their prepayment on advice from their in house quantitative surveyors and whilst a  lower prepayment might not be ideal it will also protect the directors by not exposing themselves too much from a personal point of view.

Invoice Discounting Definition

April 1st, 2010

Invoice discounting can simply be described as the provision of finance against unpaid invoices. The finance provider will take security over the book debts of the business by registering a debenture over the business. Traditionally the invoice discounting company will release between 75-85% of unpaid invoices of up to a 90 day period. Invoice discounting is usually confidential in that your customers are unaware that you are discounting your invoices. This is different from factoring whereby your customers are aware that you are raising cash against your invoices.

The criteria for obtaining an invoice discounting facility is higher than a  factoring facility and the decision of the invoice discounting facility will be influenced by

1.  the business should be able to demonstrate that they are trading profitably and that there is a reasonable net worth. The last set of audited accounts and most recent management accounts will be required to evidence a profitable well run business.

2. the lender will pay particular attention to the quality and spread of your customers. Ideally no one customer should account for more than 20% of turnover. There are a number of invoice discounting companies providing single debtor invoice discounting however it depends on the risk of that particular customer and whether credit insurance is available.

3. you must be able to evidence that a good credit control system is in place and that the turnround of issuing an invoice to receiving  payment is done in a timely manner.

4. In addition a good sales ledger must be in place, ideally be computerised and adequately kept up to date.

As we have previously mentioned not all invoice discounting companies are the same. Every lender has a sweet spot. A good invoice discounting broker will be able to recognise which finance company will best suit your particular requirements. The introduction will be based on the length of time the business has been trading profitability, spread of and quality of the debtor book and geographic location.

Using a broker to refinance capital equipment

March 31st, 2010

We totally understand the need to get the best possible deal on any business finance agreement. It is no different whenit comes to raising cash against unencumbered plant and machinery. No doubt any business wishing to refinance plant and machinery will go to their banks first . When they realise that this is an area of finance the banks cannot help with they will probably search the internet for inappropriate solutions. Any search of google will reveal hundreds of companies offering cash against unencumbered assets. The problem is that most of these will be brokers and when it comes to refinancing existing machines and equipment having too many brokers involved can have a detrimental affect on your credit aapplication

We have seen one deal recently where up to eight brokers have introduced the same the deal to one finance company. And the worrying thing was that some of these introducers were in fact mortgage brokers with no experience in the asset finance market. At the end of the day there are probably only half a dozen lenders in this market so all paths lead to the same funder. If a finance company starts to get the same deal from many different sources they will not take the deal seriously because they will know the deal is being touted around the market. They have nothing to loose by providing onerous terms and conditions and their approach will be very much take it or leave it offer.

At XL Business Finance we have over 10 years experience in providing equipment refinance solutions. We do things slightly differently. Firstly we know all the plant and machinery valuers which the different finance companies use. We wll go iect to these valuers and get an idea of the level of security in the deal. We then provide a realistic opinion as to the amount of cash that can be raised against the kit in questions. We will then provide a proposal to the most appropriate funder having already dome our homework on the kit. A clean and realistic application will have a much greater chance of success.!!

Commercial Mortages UK

March 29th, 2010

In the current environment of banks being difficult in terms of providing new funding it might be worth mentioning another reason why a business should use another invoice discounting company other than their own bank particularly where a commercial mortgage is involved.

When a bank has got too much of a handle of a businesses finances and their is a requirement for additional funding, due to the overall exposure it might be difficult to obtain the required additional working capital. In extreme cases the banks may view this as a signal that the business is in difficulty and pull in some investigative accountants. In our opinion all banks are interested in is covering their own position and have little desire to help a business trade thorough any difficulties.

Unfortunately it is not straight forward to switch from one invoice discounting company to another invoice discounting company when a commercial mortgage is involved. One would think that a commercial mortgage is a stand alone facility which really it should be. However as soon as invoice discounting is taken out a all assets debenture will be registered against the business which will also include the property as well as plant and machinery

We have seen a few instances where the bank have in principle agreed to let the invoice discounting business go but in reality it has taken months and months to do the transfer because of  the incumbent bank wont realise the book debt from the debenture. In reality a deed of priority will be required in complicated cases however these can take forever and a day and as we know dealing with the banks legal departments can be like pulling teeth,

The best way forward is always to keep different finance products separate from different finance products and as such you will never find yourself in the mercy of one bank.

Why use an invoice financing broker?

March 24th, 2010

Any search of google will reveal hundreds of choices of invoice financing companies. There are three main types of companies. Independent brokers, bank owned invoice finance companies and independent factoring and invoice discounting companies. Independent brokers are a good place to start. Not to be confused with an independent factoring or invoice discounting company that provide the funding and service themselves but are independent in that they not bank owned.

A good independent broker will know the factoring and invoice discounting market inside out. Based on your businesses particular circumstances such as length of time trading, location , profitability, turnover and quality of debtor book he or she will be able to narrow the choice of factoring companies down to about two or three of the most suitable funders. Different lenders have different lending criteria and most have different sweet spots. What is one mans poison is another mans whatsit. We would always recommend having a meeting with a max of two to three providers so you can a feel for personalities and decide which finance company that you may be able to work more closely with.

We would also be wary of a site that links in to a number of different funders to provide the cheapest possible quotation. There are so many factors which need to be taken into consideration when choosing your funding partner. Although cost is certainly important it shouldn’t be the be all and end all as there are so many other consideration which should be considered.

XL Business Finance is one of the leading indpendent brokers in this firld and without a doubt will certainly be able to add value to the proceedings.

Specialist Lending Units

March 24th, 2010

Recently we have had a number of enquiries from businesses that need help and advice because they have ended up in a banks specialist lending or intensive care unit. If a business has had a dip in performance thee banks take the opportunity to move the business to this specialist division of the bank. Whilst the business does not need to be a basket case the cynical amongst us might think that the banks are taking the opportunity to slap a load of unnecessary charges onto their customer. Any business having such an experience will know all too well that they use this as an opportunity to increase interest rates and charge monthly management fees. In deed many businesses don’t ever come out and allot will end up going into administration. If ever there was a case for not having too many eggs in ones basket!

For many years we have been advising customers not to have the same clearing bank  which  they use for invoice discounting or factoring and if at all possible to use a total separate financial institution for any commercial mortgages. Any business which has adopted this three pronged approach to banking and business finance will find themselves protected from the uncertainty of been exposed too much with one financial institution.

Any business finding themselves at the mercy at the banks can look at alternatives. They are out there and we know how to handle the banks. We have over 10 years experience in dealing in such matters and we will certainly be able to help and add value to your business.

Financing Imported Goods

March 19th, 2010

Many businesses are seeking finance to enable them to import goods from foreign countries. Providing that the goods have been pre sold in this country it may be possible to get funding from start to finish by way of an international trade finance facility dove tailing against a factoring or invoice discounting facility.

Many of the high street banks will provide funding enabling business to import goods however many banks will provide a line of credit against the strength of the business in terms of profitability, strength of the balance sheet and the length of time the business has been trading. You must also bank with that particular banking institution and more often than not security such as charges against property etc is often required. Therefore as with most high street banks they can only provide funding for the customers with the best possible credit score.

This leaves a big gap in the market for businesses unable to obtain funding from the banks. Thankfully there are a number of independent based finance companies that are able to provide funding against the strength of your orders and documentation. Therefore funding is potentially available for new start businesses, companies that have declined by their banks or businesses with less than positive trading performances. Providing there is value in the goods that you are buying a trade facility will be provided for you to import your widgets etc and providing the goods have been presold a factoring o  invoice discounting facility will dove tail and be used to repay the trade facility on delivery of your goods to your customer. Simple! Well in theory it is

Factoring and EFG funding

March 18th, 2010

It is most commonly believed that the only way to obtain EFG funding is via the banks. On the basis that two high street banks have written nearly 80% of all EFG funding it is easy to understand why. However it is not commonly known that it is possible to obtain EFG funding on the back of a factoring or invoice financing agreement. This may prove very beneficial because the banks can be difficult to obtain funding even when the additional security of the EFG guarantee is available.

There is a misconception that because an EFG guarantee is available from the government  that funding will automatically be approved. This sadly is not the case. Any application for business finance via the banks  must firstly meet with that particular banks strict lending criteria. Providing that the application ticks all the boxes in terms of meeting the bank criteria and the only reason the bank can not  do it is because of lack of tangible security then this where the EFG loan guarantee scheme will kick in. So if the application is a basket case it wont get passed the first hurdle.

Therefore if your application for EFG funding has been unsuccessful via the banks it may be worth looking at efg funding via a factoring or invoice discounting facility. Independent factoring and invoice discounting companies tend to be more flexible than the banks so you have absolutely nothing to loose.


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.

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