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Posts Tagged ‘Factoring’

Single Debtor Factoring

Friday, September 11th, 2009

Single debtor  factoring as would suggest provides debtor finance against one single customer. As with any other factoring factoring facility funding is provided for up to 80% of unpaid invoices for up to a 90 day period.  However from the finance companies point of view providing finance against one customer can prove quite risky and as such not all finance companies will be keen to offer a facility.

It is unlikely a high street bank will provide single debtor factoring however one or two of the larger and generally more flexible and commercial factoring companies will offer a facility. However with any tricky finance deal there will be one or two caveats. The debtor  must be strong and the credit limit will need to exceed the total facility required.  In addition it is recommended that credit insurance is taken out against the debt. Therefore in the event of any this will protect not only the funder but also our customer. I think this is common sense really. A default with a good spread of customers will always be painful but more often than not can be absorbed into the business. Imagine if you had one customer and they go bust and you havnt any credit insurance. Not only will you go bust but any  personal guarantees may possibly be called upon [potentially resulting in bankruptcy. Perish the thought.

Invoice Factoring (2)

Thursday, September 10th, 2009

Invoice factoring need not only be for businesses with hundreds of thousands of turnover. XL Business Finance is helping businesses with turnover as low as £100,000 obtain finance from the most appropriate finance company.  

With a turnover as low as £100,000 it is very unlikely that a business will obtain confidential invoice discounting, however it may be possible to obtain a soft touch factoring facility. Not all finance companies will provide such a service so it is important that you take advice from a reputable and knowledgeable factoring broker.  A soft touch factoring facility will enable a business to maintain the majority of their credit control however the factoring will be provided on a disclosed basis and as such your customer will be aware of the factoring companies involvement.

If a full factoring service is required it is important that the most suitable finance company is chosen for your particular needs. Factoring provides a full credit control service and debt collection and as such it is very much a value added service.  As with any value added product you tend to get what you pay for.  The biggest comp-laint we hear about is the inability of certain financial institutions to collect money. What is the point of saving a few quid a month if you are not getting a proper service. Flexibility, a full on credit control service and the ability to pick up the phone and have a conversation with a decision maker is the key to a successful factoring relationship.

XL Business Finance is one of the UK’s top factoring specialist and has been advising clients on various financial solutions for over ten years

Finance in a recession

Wednesday, August 12th, 2009

The difference between this recession and the last one is that businesses have a much wider option of finance products than they previously had. In particular there are dozens of factoring and invoice discounting businesses providing bespoke funding options.

Not only has factoring continued to thrive in the recession many Managing Directors and Finance Directors are turning to the Crown to obtain payment holidays with PAYE and VAT. Any additioanl cash flow  benefit will greatly enhance chances of survival in these difficult times.

In some cases it may be necessary to restructure the business via a pr-packaged administration. Again there are so many options available to directors than there were 10 or 20 years ago.

Six months the finance  market was in turmoil as many funders were reluctant to extend finance and some funders particularly the foreign owned funders pulled out of the market completely.

On a positive note providing the deal stacks up there are many business financing options available to businesses. There are still adequately funded factoring and invoice discounting business still open for business. Many of these lessor known funders can still provide support for businesses which are basically sound but have come up against financial difficulties  not previously experienced. These are the businesses which the banks have been struggling to assist.

The sooner a we are advised of a problem the sooner we can explore the options and provide a recovery solution.

Financing A Prepack

Monday, August 10th, 2009

A prepack other wise known as a phoenix is whereby a business goes into administration with the intention of the directors purchasing  the assets ofthe business in a newly formed limited company.   Not all finance companies will fund prepacks so it is important that all ones ducks are in line before a business pushes the button.

It is important to have the right factoring or invoice discounting company in place. As banks more often than not will not finance prepacks  it may be advisable to replace the bank owned finance company with a friendlier  and more accommodating finance company. This may only work when there are no other bank borrowings. If an overdraft is in place consideration must be taken into account if notice is given to quit a factring facility as undoubtedly the bank will call in the overdraft facility.

If there are no other facilities complicating proceedings the new factoring company will replace the inflexible factoring company. AS they wll be the main debentyre holder they can appoint the administrator of your choice, fund the new co and collect in full the debtors of the old co. Seamless!

Perhaps not. Any hire purchase and finance lease deals must be taken into condsideration. It may be possible to rewrite any hire purchase or finance lease deals into the new co however not all finance companies will novate the agreements into the new. XL Business Finance has experince of helping customers replace such finance agreemnts.

Financing A Prepack

Monday, August 10th, 2009

A prepack is otherwise known as a phoenix. A business goes into administration and the directors purchase the assets off the administrator in a prearranged agreement. Not all finance companies will finance a prepack so it is important to get the best possible advice and have all the new finance facilities in place. A good corporate insolvency firm will provide experience and guidance as to the best way forward however when it comes to arranging the new finance facilities XL Business Finance can provide some help and experience of our own.

Depending on the factoring or invoice discounting company  it may be advisable to replace the existing factoring company with a more flexible funder. As it is the factoring company that more often than not appoint the administrator it is important that the factoring company appoints the administrator which will assist with the prepack. A bank appointed administrator may lead to events not going the correct way. It is also important to take into consideration any  other bank facilities which may be called in if a customer tries to change factoring companies. This will have an affect on personal guarantees. We have seen instances where procedure were carried out against the advice of the administrator, notice was given to the existing bank owned factoring company and the bank called in a substantial overdraft . As you can imagine things got a bit messy.

Payroll Finance

Thursday, August 6th, 2009

Word on the street is that payroll finance is going to make a comeback. Payroll finance was the short lived funding solution that provided the equivalent of  two months gross payroll on a revolving credit facility.

Until recently there were two funders in the market providing payroll finance. Wageroller was the first company to stop trading and more recently Smartflow went into administration.  Payroll finance albeit an expensive finance solution providing a working capital solution for businesses which maybe couldn’t obtain working capital via the more traditional funding facilities such as overdrafts, invoice discounting or factoring. The facility was ideal for businesses which worked on a contract basis such as construction companies. It was also very popular with private schools and also PLCs.   

The advantages to the customer of payroll funding was that the facility was totally unsecured and no personal guarantees were required. In addition the funders were providing a finance product which was deemed to be a service and as such it was classed as a trade creditor. This would have been of particular benefit to PLCs or businesses with onerous banking covenants because the facility would not have affected any banking facilities.

If the product does make a come back it will be interesting in what guise it will take  and what will be different that will make it succeed  where it did not do before.

Stocking Finance

Wednesday, August 5th, 2009

Enquiries regarding stocking finance seem to be on the up. As businesses find the high street funders more and more difficult to deal with, managing directors and finance directors are continually looking for innovative ways to help with cash flow. Stocking finance is a facility normally used in conjunction with a factoring or invoice discounting facility however in cirtain circumstances it can also be funded on a stand alone basis. Not all funders do proper stocking agreements and here’s why! 

Most factoring or invoice discounting companies will tell you they can fund stock. They will only do it in conjunction with a factoring or invoice discounting facility. In addition these finance companies will only fund stock as an overpayment up to amount equal to 100% of the debtor book. For example if  a business is obtaining prepayments at 80% and the debtor book is at £100k a typical factoring or invoice discounting facility will generate £80k against the value of the invoices. The maximum amount they will be able to generate from stock is therefore £20k being the difference between the total debtor book and the prepayment amount. More often than not stocking finance can not be obtained on a revolving credit basis and the intitial loan is normally clawed back over 12 months from when the advance was made. A factoring company will use this overpayment secured against the stock to win new business or help the business with a one off project.

There are however a few funders that provide a true revolving credit facility secure against stock.  These funders are few and far between but they doexist. Depending on the turnover, profitability and length of time the business has been trading will determine which funder we will recommended.

We also know of one funder that can potentially finance stock on a stand alone basis however as you can imagine the business would need to be well established and profitable. It may be possible to get 30p in the pound however as min facilities would be in the region of £300k a stock value of around £1m would be required.

VAT & PAYE Arrears?

Monday, August 3rd, 2009

It appears more and more businesses are falling into arrears with PAYE and VAT. Although the majority of customers we help appear to be busy in terms of a full order book and reasonable sales the biggest problem is with cash flow.

Their customers are telling them they can’t pay because their customers can’t pay and so on and so forth. The lucky businesses might be able to go to their bank and obtain an increase in overdraft facility, however we are seeing more and more cases where the bank has promised an increase in overdraft and failed to deliver. Factoring or invoice discounting may release much needed working capital and it is even possible to refinance existing equipment to release equity to provide cash injection.

So what happens if there are no further means to release cash? If there is a significant amount of PAYE and VAT arrears it might be possible to obtain an arrangement with the Inland Revenue and Customs. It can be argued that a corporate recovery specialist will do a better job and can act as an intermediary between your business and the relevant authorities. In extreme cases a creditor’s voluntary arrangement or an administration might be more beneficial to the business going forward.

XL Business Finance has a great deal of expertise in providing funding in the event of an administration. The most important aspect is to appoint a friendly factoring or invoice discounting company before the administration. Even if this means taking out your existing factoring or invoice discounting company. The new factoring company will then appoint a friendly administrator to ensure the directors of the business are in the best possible position to buy the business off the administrator.

These deals are known as pre packs and are growing in popularity. In the current economic climate there are obvious advantages and businesses are using the recession as an excuse to clear out the rot and give the business a new lease of life.

New Business Financing

Wednesday, July 29th, 2009

It appears that there are still one or two individuals looking for new business financing.  I suppose this is not unexpected given the number of people being made redundant in the current climate.

Any new start business approaching their bank will need to produce business plans, cash flow forecasts and inside leg measurements. Their friendly business relationship manager fresh from university will suggest that they apply for EFG funding promise the earth , collect a load of information string the customer along for a couple of months and then after much persuading he will find out that they are unable to do the deal. No surprise there then!

AT XL Business Finance we take a more straight forward approach. We don’t necessarily require business plans and we can very quickly determine what level of funding will be obtainable. With the right information we can normally do his within a couple of days. In simple terms there are a number of ways a new business can be funded. If capital equipment plant and machinery is required  asset finance in the current climate can be obtained at an amount equivalent to the forced sale value. Any shortfall can be topped up from personal means or by taking additional security such a second charge over a personal property. Banks will not automatically lend to a new business just because a second charge is available. The rest of the plan must tick all the right boxes A task in itself in the current financial predicament.

To assist with cashflow a factoring facility can be put in place. This will release 80% of unpaid invoices immediately providing much needed cashflow. It is amazing the number of accountants that don’t recommend  factoring or invoice discounting thinking it is expensive and still product of last resort. Factoring charges start at a few hundred pounds a month and are a valuable tool for any new business.

Factoring Funding Limits Reduced?

Tuesday, July 28th, 2009

One of the most common  enquiries we are receiving via the internet is from customers that are having difficulty with their particular factoring or invoice discounting company reducing credit limits against their customers.

The headline prepayments might be 80% of unpaid invoices however the actual amount being funded might be as low as 50%. In our opinion this is one of the biggest problems in the current economic crisis. Most funders will be in the same boat however it might be worth shopping around as funding limits might be being reduced for other reasons.

There are plenty of finance companies running out of cash at the moment, others have over exposed themselves to a certain sector or have lent too much on invoice discounting and are trying to balance their portfolio.  The independent finance companies use external credit reference agencies to determine credit limits whereas the banks and high street lenders more often than not use their internal resources to determine credit limits.

Who will give the highest credit limits will depend on what experiences the finance companies and credit insurance companies  have with particular sectors, existing customers and market information. Normally the independents provide the highest limits however it is not unknown for the banks to provide higher limits. When choosing a factoring or invoice discounting company this is one of the factors which must be taken into consideration.


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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