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How to choose an invoice finance company

Monday, November 16th, 2009

A question that at XL Business Finance we are asked most frequently. Imagine the financial freedom that an invoice finance  facility will provide. Up to 90% of unpaid invoices are released by way of a cash injection into your business as and when you raise your invoices. This is a great facility which grows with your business and there are many UK based finance companies offering to help. One search on google will reveal hundreds of factoring companies.  Some are bank owned, others are independent and most are still being aggressive in terms of doing deals. How do you know which finance company is best for your particular needs. At XL Business Finance we have 15 years experience of helping and advising our clients.

Invoice Finance is basically a generic term for the many different finance options available. Factoring , invoice discounting, confidential factoring and confidential invoice discounting are all basically forms of debtor finance.   Which finance company is best for you depends on which facility you require. New start businesses, businesses with a poor set of trading results or with a relatively small turnover will only be offered a  disclosed factoring facility whereby your customers will be aware that a finance company is financing your invoices.  XL Business finance would normally recommended one of the larger independents for a factoring facilty because normally they provide a better service than a bank based factoring company. However if your business is long established and profitable and the finance company will allow you to do your credit control then in certain circumstances a bank based invoice discounting company may be more appropriate. However beware if your business trading performance takes a urn for the worst then you will be wishing you have gone with a independent who tend to be more approachable and flexible.

Invoice Factoring For a Small Business

Sunday, November 15th, 2009

There are many forms of  products available and XL Business finance as an independent factoring company has been advising clients for many years. Whether you are looking to switch to another factoring company or you are considering using factoring for the first time XL Business Finance can provide free and impartial advice to you and your business.

Quite often we get asked to asses an existing facility and quite often we recommend that the client stays where they are. We are great believers that if it isn’t broken then don’t try to fix it. However we do believe that invoice  factoring for a small business is  very specialist market. What is the point of going to a high street bank if your turnover is only a couple of hundred thousand a year. You will be lost in a great big institution where you wont be able to speak with a decision maker and your business will be too small for anyone to care.

The good news however that there are a number of smaller independent factoring companies that specialising in serving the smaller end of the market. Their ethos is purely customer service driven and they are able to help you in a way that will seem like a breath of fresh air compared with the high street banks. These finance companies can be completely regionalized so to find out which one near you sis best for your business give us a call


Lloyds bank restricting my invoice discounting facility

Thursday, November 12th, 2009

Hardly no surprises that any business currently using a factoring or invoice discounting facility with LLoyds bank may be having their credit lines severely restricted. XL Business Finance has seen three customers this week all wishing to move from LLoyds due to a restriction in cash availability. On Tuesday this week LLoyds bank announced the loss of 4500 jobs some of which will go in the collections department. We are unclear if itis from their cash flow arm LLoyds TSB Commercial Finance however the bank is obviously under pressure and as such we are starting to see businesses being affected by their noncommercial view.

Traditionally it can quite a long winded affair switching invoice discounting or factoring companies especially as many finnace companies will tie in their customers for a least a year and will require to provide 3 months notice if they wish to switch funder.  Sometimes it  my be possibel to buy one elf out of a deal with the support of a new finance company however even then it might be a  costly exercise. The good news is that many of LLoys customers have been signed up to a short one month notice contract and it is these customers that we are seeing take advantage of their ability to switch finance company. If in doubt we can check any documentation on your behalf and give you some advice from an independent view point.

Factoring Company

Thursday, October 29th, 2009

Factoring is simply the means of releasing cash against unpaid invoices and providing the financial freedom to grow your business. Any search of the internet will show hundreds of businesses offering factoring services. So how do you know which one to choose and which ones to avoid? Factoring is not just about providing cash and financial freedom, it is very much about adding value. Credit control is a very important part of the sevice and differnt finance companies are better at it than others.  XL Business finance is an independent finance company and has provided impartial advice to many happy clients as to which factoring company will best suit their particular needs.

Factoring can be provided by banks and independent finance companies. The banks factoring service tends to be  less personal than a independent factoring company. With a small independent factoring tends to be their core business and as such you are never more than a call away from a decision maker. Therefore an independent can sometimes provide a more hands approach particularly if there have been any trading issues along the way. It is also worth considering  factoring provides a credit control service so it is worth discussing how differnt finance companies perform in this area.  Banks tend to chase the top few customers by telephone and the rest by letter. Not such a good idea in view of  the current post strikes. Certain independent factoring companies chase all their customers by phone. The service fee may be slightly more expensive however as one customer said to us recently ” we should have gone with a smaller more flexible but slightly more expensive factoring company and had more cash in the bank to use for working capital.”

Another consideration is your geographic location as the independents tend to regionalised and such some are stronger than others in certain areas. It is also worth noting that some bank owned factoring companies have their credit control and customer account managers and payment centres in different parts of the country. It is worth discussing these issues with an experienced factoring broker!!!

Factoring in a Prepack

Thursday, October 22nd, 2009

In the current economic climate we are faced with the unfortunate fact  that many struggling businesses will be forced to go through a pre planned administration or pre pack. In doing so a business may have a fresh start and typically the victims will be the crown , financial institutions and unfortunately some creditors and members of staff. It is a harsh reality of the recession but in our opinion it is better that a business be given a second chance to continue trading rather than the business folding completely. However any business going through a prepackaged administration will have fewer funding options.

Unfortunately most of the high street banks will not finance a prepack or phoenix company. Therefore many businesses are left wondering what finance options are available. There are only a handful of commercial mortgage options available and good luck with any business trying novate hire purchase or finance lease agreements into a new co.  XL Business Finance has the expertise and experience in helping phoenix businesses with their asset finance agreements. On a more positive note there is a plethora of factoring companies, usually independent from the high street  banks that are willing and able to fund your debtor book.

However the options in terms of products will be fewer and no factoring company will offer a confidential invoice discounting facilities. The options will be  factoring facility with full credit control, a factoring whereby the customer can do the credit control themselves and in certain circumstances it may be possible to obtain a confidential factoring  facility. To find out which product will be best suit your particular requirements and which factoring company will delver the best service XL Business Finance has over 10 years of advising and helping many satisfied customers.

Switching Factoring Company

Wednesday, October 21st, 2009

The ability to release cash against unpaid invoices undoubtedly can have a positive impact on the cash flow of a business. The extra cash can provide the freedom to grow the business and the added value of having someone chase your debts will also provide a massive bonus and a boost to the business. Typically a factoring facility can release up to 90% of your unpaid invoices with the added benefit of credit control.  However if things are not working out how easy or difficult is it to switch factoring companies?

There are so many factoring companies to choose from and not all factoring companies are the same. Some are bank owned, some are independent PLCs and some are small private companies. Which is the best factoring company for you will depend on the turnover, the length of time you have been trading and the profitability for  your business. In addition factoring is very much a value added service. Factoring can provide credit control on the back of the  funding your invoices. As such there are two elements to the charging. An interest rate at around 1-3 over bank base rate is applied to the money you borrow and there is a service fee for the credit control. For the smaller business this starts at a couple of hundrded pounds per month. The cost of using a factoring company for credit control can be very cost effective compared with the cost of employing a full time credit controller.

However as factoring is not as simple as just borrowing money there are occasions when the relationship between the factoring company and business breaks down to the point that the customer has no option but to  seek a new factor. The most difficult part of changing factoring companies is that the charges can be onerous especially if a new contract has been signed. Sometimes with some careful negotiation these amounts can be reduced however it is best timing any move to coincide with the expiry of any contract. It is not unusual for factoring companies to have a 3 months notice period so this must be taken into consideration as well. In addition if you factor with the bank and they have a overdraft as well as a factoring facility the overdraft maybe withdrawn if they are loosing the factoring. A good independent factoring broker may be able to add some value in any transfer as many of us know many of he funders very well and sometimes we can have some influence over the exiting factoring company.

Business Financing

Tuesday, October 13th, 2009

XL Business Finance can provide a fresh outlook to business financing. Whilst we cannot guarantee every business will have success in obtaining the required amount of funding we believe that if finance is available we will find  a finance company to meet your particular needs. In addition we believe that for every high street bank product there is an independent finance company providing an  alternative. We are not saying that all independents are better than banks. In certain circumstances we do recommend bank products however it is a case ogf knowing what is available so  we have to look at each individual case on its own particular merits.

We believe that any business should spread their finance requirements via various funders. For example this week we have visited a manufacturing business with turnover of approx £1.0m. The business banked with Abbey National which incidentally provide free banking for just running an account. The business had a £20k overdraft facility which against  turnover of £1.0m wasn’t really enough. The Finance Director who had come from an accounting background still wrongly believed that there is a stigma attached to factoring and invoice discounting which in our opinion couldn’t be further from the truth. They believed that they should be moving to a larger high street bank to obtain an increase in working capital facilities.

Moving to a new bank and obtain a packaged deal on funding arrangements can cause major problems. One bank providing invoice discounting or factoring some  equipment finance and possibly a small overdraft has too much control over the business. We have seen and heard instances where a customer has gone bust. The invoice discounting side to the bank inform the branch that there might be a problem and the relationship manager withdraws the overdraft. The result is another business going bust.

Our advice is to spread it around as much as possible. Use one bank to provide a clearing facility, use another financial company to provide your invoice discounting or factoring and use another to provide hire purchase nad leasing for  capital expenditure requirements. This by far the best way of safeguarding you from the banks!

Restructuring Finance

Tuesday, October 6th, 2009

Many businesses are struggling for cash flow in the current  difficult trading conditions. The ability to ease the monthly debt burden is a top priority of many finance and  managing directors. Thankfully there are many ways XL Business Finance can assist to ease the pressure.

The biggest problem is the ability to collect cash from customers who themselves struggling for liquidity. Combined with the reduction of credit limits this can produce a double whammy in terms of having a negative affect on cash flow. Not all factoring and invoice discounting companies are the same. Far from it. XL Business Finance has helped many businesses choose the correct factoring or invoice discounting company for their particular needs. In addition we have help plenty of businesses switch to a more flexible factoring company.

Another way we can add value is to look at the monthly hire purchase and leasing payments. It might be possible to restructure these payments for a cheaper monthly outgoing. And if there is enough value in the equipment it may even be possible to release cash from the  equity from within the machinery. It must be pointed out that refinancing existing machinery is sometimes at a premium in terms of interest rate and as such we can provide honest and impartial advice as to whether this route will work or not.

Need an Overdraft?

Wednesday, September 23rd, 2009

We continue to hear horror stories about businesses having their overdrafts pulled by the bank. For years we have been advising customers to avoid bank overdrafts at all costs. Overdrafts are repayable on demand and the banks can and will demand repayment at a moments notice.

I was with an insolvency practitioner yesterday whom had witnessed one of the worst examples of an overdraft being pulled by a high street bank. The customer had a £800k overdraft which was secured against a personal property which had approx £450k equity. The bank gave the customer 6 months to reduce the overdraft by £400k. The customer did so by increasing terms with creditors, cutting staff and organising an arrangement with the inland revenue for Paye and tax arrears. As soon as the overdraft was down at £400k the customer was called into the bank the overdraft was officially withdrawn, the business went bust, his house was repossessed and the owner /managing director was made bankrupt. Now I know this sounds a bit harsh and there are two sides to every story but these kind of scenarios can often be avoided.

If possible using a factoring or invoice discounting is always more advisable than using a bank overdraft. The facility can often provide more cash than an overdraft, it isn’t repayable on demand and it will grow with the business. Secondly where possible always use a hire purchase or leasing facility to purchase capital equipment. These are stand alone finance products and are again are not repayable on demand. Remember cash is king!!!!!!

Invoice Finance

Monday, September 14th, 2009

Invoice finance is simply the means of releasing cash against unpaid invoices. Typically 80% of the invoice is paid upfront by the invoice finance company. On payment of the invoice by your customer ( typically after 90 days)  the remaining 20% is paid to  you less any charges due to the invoice finance company.

An invoice finance facility will unlock cash and assist with a businesses cash flow. Unlike an overdraft facility which is fixed at  a certain amount invoice finance will grow as a business expands . In addition an overdraft facility is repayable on demand and so there is always the risk it could be withdrawn. In recent months we have certainly seen this happen as bankers continue to be nervous and unsupportive in these difficult times. The security that banks require to agree an invoice discouning facility also tends to be more onerous with property often required to secure a facility. An invoice finance facility relies on the unpaid invoices as security. 

Typically a factoring faciltiy  is provided on a disclosed basis and offers a full credit control service. Confidential invoice discounting is normally on an undisclosed  or confidential basis and is just a means of providing cash flow because credit control is kept in house. There are many variations offered by numerous invoice finance facilities and different finance companies have different niche products and attributes. A good invoice discounting broker will be able to advise as to  which funder will be best for your particular needs.


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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