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Scale-up Businesses struggle to find funding

Monday, January 29th, 2018

A scale-up business is recognised as a young organisation with at least 10 employees which grows by an average of 20% each year. Scale-ups are of huge importance to the UK economy providing jobs, inward investment and innovation.

However, scale-up businesses often find it difficult to source finance from mainstream funders due to a lack of trading history, asset value or limited management experience.
Grants and regional funding options exist, but many are for very early-stage development rather than growth. Bank Loans are an option for companies with solid cash flow that can support the interest payments. However, new global capital regulations designed to make banking more stable have made it harder for banks to offer large overdrafts, and so alternative options are often required by businesses looking to raise finance.

Invoice finance is a popular way for scale-up business-to-business (B2B) firms to unlock vital working capital as it grows with your business. Working capital finance options for high-growth business-to-consumer (B2C) firms are less obvious. However, a relatively new type of lender is emerging offering merchant cash advances where businesses repay a fixed percentage of revenues.
Many crowdfunding platforms exist, including equity and non-equity options. When it comes to investing in new equipment, there are plenty of options available. Asset finance, otherwise known as asset leasing or lease rental, has been around for many years and for good reason, but not everyone is aware of how it can benefit them.

Asset leasing is a tax-efficient and flexible way to purchase the equipment you need without compromising your cash flow, and is suitable for all industry sectors and any size of business. Terms are available from one to five years with only a minimal deposit required in most cases.

Ultimately, there’s no easy answer for financing a scale-up and businesses may need to share the risk and look at numerous options. It does depend on your approach to risk, your attitude to giving away part of business, and your company’s ability to finance a debt.

To see how we can help you grow your business by providing funding options to suit your needs, contact XL Business Finance today for an initial discussion.

Manchester – 0161 980 0577
London – 020 3301 4540

SMEs owed £33.6bn in late payments

Monday, February 6th, 2012

BACS, the payment company states that UK SMEs are  were owed £3bn in late payments which is a record since records began and 10% up from last year. Invoice finance and in particular factoring maybe a valuable tool in helping combat late payers. Not only will a full factoring service provide  cash against up paid invoices but it will also provide a full credit control facility leaving you free to go and run your business.

Small firms are owed an average of £39k and have to wait two months to be paid. The worst payers are large firms responsible for 48% of all late payments and the best payers are the government and not for profit organisations. If you feel that late payers are restricting your business factoring could be the perfect solution


Avoid Becoming a Statistic

Wednesday, September 28th, 2011

The Bank of England’s recent Credit Conditions Survey found that default rates on loans in Q2 increased for small businesses. By acting now, an invoice finance provider can help your business to avoid becoming part of these statistics.

In addition to trying to win new business, companies are equally concerned about whether their existing customers can pay, and on what terms.  Businesses often rely on loans and overdrafts to provide the capital they need; in recent years however, a variety of invoice finance options, such as factoring have helped SMEs to ease their funding gaps.

Not only do these arrangements have more flexibility than bank loans, but they are quicker and tailored to a company’s specific requirements. In both good and challenging markets, invoice finance can provide the flexibility and access to capital that a business needs to thrive and grow. The annual cost of a factoring facility starts as low as 1% of sales so it is a very cost effective option for business owners.

Banks still letting smaller companies down

Thursday, September 8th, 2011

Data just released from the British Bankers’ Association show that lending to private,non-financial companies reduced by £2.5 billion in June from May, the same level as seen one month earlier.

This is an even larger amount than the average £1.4 billion monthly drop seen over the previous six months; it is apparent that despite government policies and public calls to increase lending to this sector of the economy, there is still reluctance from banks to support those businesses that really need some help.

However, there are alternatives that are still available to smaller businesses; banks are not the only option. Invoice finance could be a viable solution for companies that would otherwise struggle to find the finance that they require. Without the need for additional security a bank may require, Invoice Finance can provide the necessary funding to smooth out your cash flow and provide the working capital you need to survive through these challenging times.

Replacing an overdraft with invoice finance

Saturday, April 2nd, 2011

We are still seeing so many businesses struggling for cash flow with inadequate working capital facilities and replacing their bank overdrafts with invoice finance. Bank overdrafts are not designed to grow as a business expands and believe it or not there are many businesses out there that seemed to have turned the corner. This seems very much to be the case in the manufacturing and engineering sector which seems to be very very buoyant at the moment. Invoice finance by either factoring or invoice discounting can release cash against 85% of a businesses unpaid invoices. In many instances this can create cash far in excess of any bank overdraft facility is capable of doing.

Invoice Finance and EFG Funding

Wednesday, March 16th, 2011

It is now possible to get Enterprise Finance Guarantee Funding ( EFG) on the back of invoice finance facilities. Additional funding over and above the traditional 80/85% prepayment may be available.

This news may be a welcome relief to businesses that have approached their own high street banks for EFG fundin,g but for one reason or another have been refused. It must be remembered that as far as banks are concerned the availability of a government guarantee doesn’t make a bad deal good. For a business to be available for EFG funding via a high street bank, they must meet that banks normal lending criteria and if there is a lack of security in the deal then that is where the EFG funding kicks in.

If you don’t meet the banks’ normal lending criteria then it won’t get past first base. The problem is that it appears that many commercial high street bank managers don’t know what they can and can’t do and rather than saying no, they string the customer along on a merry dance.

There are currently two invoice finance companies offering EFG funding on the back of invoice finance. One provider will provide an overpayment to a maximim of 100% of the outstanding debtor book whilst the other will provide EFG funding equivalent to any director’s loans that there might be in the business.

Obviously these companies use slightly different criteria and it doesn’t take a rocket scientist to work out which invoice finance company might be best for you.

£4.0m invoice discounting facility for export business

Tuesday, February 22nd, 2011

As an credible independent invoice finance broker we were recently approached by a business having trouble obtaining funding from their high street bank. The business mainly exported goods to Europe and Africa had access to a £3.0m invoice discounting facility. As most of the African debt could be credit insured it had always been possible to obtain funding against these outstanding invoices. That was until the bank had a change of policy.

At a review meting the bank announced that they would no longer be able to finance the African invoices. A change of policy apparently. The customer during 15 years of trading had never had a bad debt into Africa and in any case most of the debtors could be credit insured. This obviously had a dramatic affect on the businesses cash flow and as such the £250k in case of need overdraft facility quickly reached its limit.

In our opinion a switch from one high street bank to another would certainly be out of the frying pan and into the fire. We therefore introduced our customer to a couple of lessor known invoice discounting ccompanies that specialise in bigger deals. They kind of start off where the high street banks start getting uncomfortable. They tend to be owned by foreign banks however unlike invoice discounting companies attached to high street banks they have their own autonomy. In addition because they are foreign owned they tend to be able to deal with world wide markets.

It is always worth getting an alternative to a high street bank and a good independent finance broker will undoubtedly be able to point you in the right direction

Machinery Refinancing

Monday, January 31st, 2011

During January our biggest type of of enquiry was for businesses looking for machinery refinance. I suppose that you can look at this from two angles. A business may need to refinance because they are struggling, running out of cash and need to find some funds from somewhere to keep the business afloat. Or they need to refinance machinery because they are doing well, need some additional working capital because the banks are unwilling or unable to help

Most business owners will say it is the latter however in a small number of cases it may genuinely be because a business is struggling. Any asset based finance company will always be willing to lend against the value of an asset providing they are doing so for a positive reason. On the other hand if a business is struggling they may insist that you take advice from a specialist accountant or insolvency practitioner.

It maybe that it it is better to fund a business following a pre packed administration particularly if there is a lot of creditor pressure and crown arrears. Many business owners think that it is not possible to obtain funding following a pre packed administration. In reality, asset based lenders would probably prefer to fund such a arrangement because the new business going forward will be leaner and meaner. It is true that a bank may not wish to assist with the funding however in reality this should not cause any major problem going forward. An independent invoice finance company will be happy to provide a factoring facility and as such there should be no need of a bank except for clearing cheques.

Who Is doing Enterprise Finance Guarantee Funding ( EFG ) ?

Wednesday, November 17th, 2010

The banks are supposed to be helping small businesses obtain difficult funding in these difficult times and one way is via the EFG or Enterprise Finance Guarantee. Whilst  the EFG does not guarantee success of funding via the banks there are one or two viable alternatives via the invoice finance companies.

The problem with the bank based scheme is that a proposal for funding should meet all the banks normal lending criteria. If you have a proposition that they want to do but the only thing that is stopping them doing it is a lack of security then this is where the EFG scheme gives them the security to do the deal. If for some reason they don’t want to do the deal because your business hasn’t been trading long enough or the financials are not strong enough then it wont get passed first base. EFG funding does not make a bad deal good.

An alternative to bank based EFG loans could be funding via invoice finance companies. One funder provides EFG funding on the back of a factoring or invoice discounting company match funding any directors loans but up to a maximum of fifty percent of the debtor book. Another invoice finance company provides EFG funding to give a business 100% of its debtor book.

Invoice finance companies tend to be a little more flexible than the banks therefore if you have drawn a few blanks then it is worth giving them a call. We will gladly point you in the right direction.

How do I obtain Export Finance?

Tuesday, November 16th, 2010

Export finance is very simply funding your foreign invoices via way of an invoice discounting or factoring facility. This is a very specialist market in the invoice finance sector and as such only a few finance providers can offer a proper facility.

A number of these specialist invoice finance companies have a network of offices and associations spread around the world offering multi currency facilities and credit control. Obviously it is easier to obtain funding in developed countries however it may be possible to obtain funding in less developed parts of the world so long as your customer has a credit rating.  As with any factoring or invoice discounting product different companies are better in handling different sectors than others. Just because you go to your bank and they inform you  that it is not possible to factor foreign invoices it doesn’t mean it cannot be done via a specialist lesser known finance company.

A good independent finance broker will be able to introduce you to the most appropriate funders. Again it is important to be talking o two or possibly three finance companies so it doesn’t become a one horse race. However if you invite every tom dick and Harry of a finance company non of them will take you seriously an in our experience you end up getting a worse deal.

XL Business Finance has been helping business for over 10 years find the most appropriate funding partner. Give us a call today to see how we can help your business. Go on you know you want to!


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


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