Asset finance leasing - XL Business finance

Invoice Financing in a prepacked administration

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

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

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

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

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.

Refinancing Printing Equipment

November 29th, 2009

XL Business Finance has been helping printing companies raise cash against unencumbered  printing equipment or equipment which is coming to the end of its finance. The ability to raise cash is providing a life line for many cash strapped businesses especially as the banks are still being very selective in whom they will advance money.  In fact any industry sector which has large and expensive items of capital equipment, such as printing, is in a fortunate position.

Cash can be raised just for about any purpose, however if your business is struggling you may expect to pay higher interest rates than if your business is trading well.  Many asset based lenders will only advance money if your business has had difficulties however the finance company will probably need to make a few checks to verify the future viability of the business.  You may also find that the loan to value may be reduced as you will  be considered a higher risk.  Business that are trading well may command a more favourable rate however don’t expect bank rates. Refinancing capital equipment is s very specialist market and as a rule of thumb high street banks and finance companies  wont refinance equipment.  More profitable  businesses might want to refinance equipment to provide a deposit for another project .  We are seeing more and more businesses wishing to refinance to reduce their exposure with the banks or where they have been refused finance from the banks because of their outstanding exposure.

It may even be possible to use cash from refinancing in conjunction with factoring or invoice discounting to provude  a new funding package.

Is EFG Funding working?

November 28th, 2009

EFG Funding was supposed to rescue many business from the economic gloom. It was supposed to provide a life line and the ability for businesses to borrow  money where they wouldn’t have normally been able to. So whats been happening?  We get many calls from businesses wishing to apply for EFG Funding wondering why their own banks have declined them. In reality there are two banks who have accountable  for 90% of the lending to date. If you want to know which ones they are then give us a call and we will be happy to have a chat.

Many businesses are under the misconception that EFG funding is there to help them irrelevant of their financial status. The reality couldn’t be further from the truth. Before a business can be approved for EFG funding it must go through all the banks normal stringent lending criteria. In addition they will need to obtain a minimum of 30% of the total funding as a contribution to the project. And when I say the banks sstringent lending criteria I mean the banks stringent lending criteria. Your business will need to have been trading for more than 3 years , it must be profitable and from the banks point of view you must be able to evidence to serviceability and must have a very strong rational for the investment.

Now if you tick all the boxes from the banks point of view and there is a desire to lend you money then EFG funding may be offered but only if  there is a lack of securityin the deal. The bank must have exhausted all possible avenues for security including any  security that the directors may be able to offer including property!!!!

Invoice Factoring for a new start business

November 27th, 2009

In the current economic climate it is still just as difficult for a new start  business to obtain any sort of funding. As a general rule of thumb in order to be eligible for funding from a high street bank or finance company you must have been trading for at least 3 years, be profitable, provide a good old business plan, provide inside leg measurements and of course they will need your wife and kids as security. Hey and what about the EFG funding. Does anyone know a business who has managed to secure any EFG  funding?  The good news invoice factoring is probably the  easiest form of finance available for any new start business. And that includes asset finance of which are bloody experts!

Invoice factoring which enables a business to raise cash against unpaid invoices will provide most new start business with the ability to trade within the most difficult period of any new start business. As a business raises an invoice a factoring facility will provide up to 90% of your cash immediately. When your customer pays your invoice to your factoring company they will repay the remaining 10%  of your invoice less any charges.  As a new start business you will only be offered factoring which will also provide a full credit control service and depending on the spread of your customers you may be able to obtain non recourse factoring which will offer credit insurance. It is even relatively easy to obtain funding if you adverse credit. The best plan of action here would be to be fully open in your dealings as it is better to get all those skeletons out in one go.

XL Business can help you choose the appropriate factoring company for your business. How we guide you to the right factoring company will depend on your location, the expected turnover and the particular sector of your business. Please will free to give us a call to discuss your own requirements.

How to choose an invoice financing company

November 26th, 2009

There are many factors which you should take into consideration when choosing an invoice financing company. probably the most important two are the geographical location of the finance company and does  that company have experience in your particular industry.

XL Business Finance advises many clients as to the best choice of finance company and we are continually amazed that the lengths some funders go to to try and win business hundreds and hundreds of miles from their head office. We believe that there is a good finance company no more than one hours drive from any location within most major cities in the UK. What is the point of choosing a finance company whose head office is based in London if you operate out of Manchester or Liverpool. Surely if you have any issues you want to jump in a car and be having a face to face chat to someone within the hour.

Secondly it is important that your particular finance company has the expertise in your particular industry or sector. You will tend to find areas of specialism in recruitment, haulage, printing, engineering, construction and export factoring and trade finance. It is worth asking for a few references.

How does confidential factoring work?

November 25th, 2009

Confidential factoring gives a business the same benefits of a full credit control service however the facility is set up in a way that your customers will be unaware that you are factoring your debts. Businesses which have been used to invoice discounting but  have been experiencing difficult trading conditions may find that their banks are pushing them towards a full factoring service.

Invoice discounting is perceived as a more risky funding product as the finance company do not phone your customers to chase your debts. They leave it down to you and therefore you must have good credit control systems in place. In difficult times it is more likely a struggling businesses will try and put through fictitious invoices. With a factoring facility there is less chance of a fraudulent transaction because the finance company has a better control and understanding of your debts.

Confidential factoring could just be the facility that gives you the best of both worlds. It basically works by the finance company giving you a dedicated credit controller who will chase debts in your business name. Your customers are also given a unique telephone number which is answered in your name. As and when monies are collected they are paid to a trust account. By doing this the finance company maintains a far greater control on your financial matters and therefore they are at less risk. You as a customer is happy because you maintain the confidentiality which maintains your reputation and status with your customers.

At the time of writing this blog we are  aware of only one finance company that provides a confidential factoring product.  Most businesses are unaware that such a product exists and again we can use our expertise and experience to make sure you get the best possible funding solution 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. How to make a complaint | Privacy Policy

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


Manchester, Liverpool, Leeds, Preston, Sheffield, Stoke, Merseyside, Lancashire, Cheshire, Staffordshire