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Posts Tagged ‘invoice discounting’

Overdraft withdrawn when switching to factoring/invoice discounting

Monday, July 20th, 2009

If you are considering switching to a factoring or invoice discounting facility it is worth considering the implications this may have on any available overdraft facility.  It is more likely than not that a bank will have taken an all assets debenture against the company. This means that their security is the debtor book of the company. Therefore when considering an alternative cash flow product there must be enough flexibility in the headroom of the factoring or invoice discounting facility to fully repay the overdraft and provide additional working capital. Any bank informed of a customers intantion to use a factoring facility in my experience will require the overdraft repaying in full. Remember an overdraft facility is repayable on demand.

I have also seen customers being caught out wanting  to switch a factoring facility away from a bank to another independent factoring company. They have forgotten or not realised the bank has an all assets debenture registered against the business to secure a small overdraft. Before the customer can switch the overdraft will need to be paid off but it can often be the  customer doesn’t have the headroom to repay the overdraft. Sometimes it may be possible to get a small over payment from the new factoring company or it may even be possible to refinance existing equipment to repay the overdraft and provide additional working capital.

Invoice Finance

Wednesday, July 15th, 2009

Over the years invoice financing has grown in popularity. Once upon a time it was deemed the finance product of last resort however nowadays it is one of the first facilities that professional and business advisors recommended to their clients. The main reason why businesses go bust is that they run out of cash. A bank overdraft may not give the appropriate amount of cashflow to operate a business at the correct level.

More and more businesses are turning to invoice finance as a means to boost their financial flexibilty and use either factoring or invoice discounting to generate much needed cashflow.

Despite the goverment in their attemts to boost liquidity in the banking market traditional forms of bank based funding remains tight and difficult to obtain. Even the much publicised governement backed EFG funding scheme is having little affect. The good news is that many business owners are discovering that many alternative credible forms of finance are available other than the banks loans and overdrafts.

Mainly due to a lack of understanding of invoice financing these alternative forms of finance have been off the radar for many businsses. There is sometimes a perception in the market that factoring or invoice discounting can be costly and out of reach for many businesses. Factoring can be obtained for a business with turnover as low as £100,000. Costs to run a full factoring facility start from a few hundred pounds per month. There are two parts to the charges. First there is the cost for borrowing the money which is comparable to a bank overdraft. The second element of the charge is the cost for operating the facility which may include provision of credit checks on your customers, credit control and chasing late and overdue payemnts. Compare this with the cost of employing a full time credit controller or the time and cost of the owner manager chasing the debts themselves this can constitute pretty good vale for money.

overdraft facility withdrawn ?

Monday, July 6th, 2009

It is still common place that banks are removing overdraft facilities and forcing businesses to go down the factoring or invoice discounting route. The rational is that banks perceive overdrafts as more risky and when a customer asks for an increase in limit there is often no further security to justify the increase. More often than not banks will only provide an overdraft secured against property. A small overdraft is usually available against the profitability of the business, say £10-£20k but these are becoming less and less common place. To discourage businsses from renewing their overdraft facilities more and more onerous charges and terms are being seen in the market place. A factoring or invoice discounting facility should in theory provide an adequate working capital facility. Factoring or invoice discounting will provide 80% of any unpaid invoices up front. However like any other finance product the service provided varys immensely between the different financial institutions. Whilst the bank is always a good starting point there are many financial institutions which can compete with the banks on price and certainly will give the banks a run for their money in terms of service. For example some finance companies are excellent at providing trade finance facilities, others can provide stand alone stocking finance, others are excellent at providing a very close relationship to the smaller business. It is important that any business is matched up with the most approriate funder for their particular needs.

Stocking Finance

Wednesday, May 27th, 2009

Traditional it has only been possible to obtain stocking finance in conjunction with a factoring or invoice discounting facility. It has come to our attentiona that there are one or two specialist funders willing to look at stocking finance on a stand alone basis!

Are the banks putting pressure on you due to the Credit Crunch

Tuesday, March 24th, 2009

Running a busines is a challenge at the best of times and keeping cash flowing and paying suppliers and staff is a constant juggling act. This has never been more relevant than in the current economic climate where raw materials , energy and fuel costs and a squeeze on credit are putting pressure on business owners.

XL Business Finance has access to a number of funders who can provide you with flexible funding solutions that can release cash tied up in your company and releive some of the pressure you face every day in business.

refinancing existing machinery

invoice discounting


payroll finance

Cash Flow Finance

Friday, February 27th, 2009

Cash Flow Finance is the most raidly expanding form of finance and their are many funders positively active even in the current market. Whether it is factoring, invoice discounting or payroll finance these different  finance companies all have different areas of expertise. For example international trade finance is only undertaken well by 3 or 4  companies. Like wise stocking finance is provided by only 2/3 companies. Choosing the right company for your business can be made easier by speaking to a good independent broker.

Confidential Factoring

Monday, February 16th, 2009

It goes without saying that  invoice discounting is the preferred option when it comes  to a confidential cash flow finance facility. Although factoring traditionally provides credit control, it  is provided on a disclosed basis therefore your customers are aware of your facility. Invoice discounting is perceived as a bigger risk therefore businesses must normaly be well established and profitable to be considred for such a facility. More worryingly in the current credit crunch/recession banks are transferring customers from invoice discounting to factoring facilities or asking them to move away from the bank completely. It is very difficult to get get invoice discounting for businessses which maybe are experiencing tough trading conditions. However confidential factoring may be a half way house. A dedicated credit controller chases the debt in the name of the client and monies are paid to a trust account. This is a very specilaist area and not all finance companies can offer this facility

Payroll Finance

Tuesday, February 3rd, 2009

At .85% per month Payroll Finance isn’t the cheapest form of funding however when you consider that there are no personal guarantees required and that the payroll funder is classed as a trade creditor it is proving a viable alternative to a bank overdraft. There is no guarantee that banks are even willing to grant overdrafts and they more often than not require additional and onerous security.  Payroll finance provides up to two months of the gross monthly payroll on a revolving credit facility. It can sit alongside traditional cash flow facilities such as factoring or invoice discounting. Surely less reliance on the bank has got to be a good thing in these difficult times!

Bank Overdraft or Invoice Factoring

Monday, December 15th, 2008

Not only are we midst of a recession but when it comes to the banking and finance sector we are heading into unchartered territory. More and more banks are restricting borrowing  to their own customers (and the good ones at that). XL Business Finance are seeing more and more customers  wishing to switch from bank overdraft to factoring or invoice discounting. Most overdrafts are repayable on demand and the banks can and do withdraw overdraft  facilities at the first sign of trouble. Never has it been more true that banks are happy to give you an umbrella, but at the first sign of rain they want it back. Why take the risk? Not only will a factoring or invoice discounting facility replace your overdraft facility it can quite often provide additional working capital and will grow with your business.

Providing you are operating within the terms of facility factoring or invoice discounting it won’t be pulled from under your feet. As an independent factoring broker, XL Business Finance can guide you through the maze of different factoring companies. Not all factoring companies are the same and we can certainly add value in helping you find the right funding partner.


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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