It is becoming increasingly common for high street banks not to offer hire purchase or finance lease facilities especially for transactions sub £50k and even sub £200k with one bank. Although your bank may offer funding for purchasing plant or machinery they are increasingly doing so by term loans. These loans are not necessarily secured against the assets being purchased but are agreed based on the trading performance of the business and security such as land already being in place. Although you may get a slightly cheaper rate than by going to an independent asset finance broker you run the possibility of tying up future lines and overexposing your business too much with one financial institution. If you can do we would recommended spreading the risk about!
Archive for the ‘Case Studies’ Category
Bank Loan or Hire Purchase
Tuesday, March 29th, 2011Will my bank give me the best asset finance deal?
Monday, March 28th, 2011Other than a businesses own bank there are still only a few independent asset finance companies offering hire purchase and finance lease facilities. And depending upon which bank you are with you might not get offered asset finance at all. If a bank wants to deal with you then you will get some of the best deals possible. However do you really want to tie up valuable banking lines which may restrict your future ability to obtain funding. If you can get funding via a third party funder it is always advisable to spread it around a bit. You may have to jump through a few more hoops but it will certainly be worth it!
Asset Finance and CCJs
Wednesday, March 23rd, 2011The fact that a business has CCJs doesn’t necessarily prevent it from obtaining asset finance, however it certainly makes it more difficult. Most high street asset finance companies such as ING Lease will not touch a business with a CCJ. XL Business Finance recognises that not all CCJs are the fault of the directors.
We are therfore regularly providing hire purchase and finance lease facilities for businesses that have CCJ registered against the business. We recognise that they picked up due to disputes with suppliers or over zealous creditors. as long as there is a credible reason then it is certainly possible to help.
Does Your Business have the XL Factor?
Monday, March 21st, 2011Does your business have the XL Factor. XL Business Finance has been helping Managing Directors and Finance Directors put the X Factor back into their business. Whether it is factoring , invoice discounting , asset finance or refinance we are fast becoming one of the UKs leading and most respected independent finance companies.
In a time when it is very difficult to obtain funding via more tradition banking facilities we go the extra mile to help you find the right funding solution. Whether you are a blue chip company requiring the best interest market or a or a company requiring funding out of an administration we provide by far and away so many options than a high street bank. Give us a call today to see how we can the XL Factor into your business!
Invoice Finance and EFG Funding
Wednesday, March 16th, 2011It 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.
New Start Asset Finance
Wednesday, February 23rd, 2011New start asset finance and factoring facility agreed for new start direct mail business
Very brave I hear you all shout. A new start business in the current economic climate. Well with the right type of funding support greatly increases the chance of survival. It is a well known myth that businesses don’t go bust because they don’t make money but because they run out of money. How many times have we seen many businesses purchase equipment for cash and then at a later date try and refinance the kit because they have run out of money. We say time and time again that it is far easier organising the finance on the outset rather than trying to do it retrospectively.
Under the right circumstances it is always possible to organise hire purchase and leasing for a new start business. Allot obviously depends on the type of equipment and the security that it offers. Traditional assets with good residual values always provides better security than high tech equipment and are easier to finance. In addition the people behind the business are just as important and your personal circumstances will be taken into consideration.
Once you are up and running it is important that your business has adequate cash flow. Overdrafts are hard to come by for new start businesses. A factoring facility providing cash against unpaid invoices will provide a valuable working capital and a life line. In choosing your factoring company beware not all factoring companies are the same and some are better at handling new start businesses than others. Much will depend on the nature of your business , the quality of the debtor book and your geographic location.
£4.0m invoice discounting facility for export business
Tuesday, February 22nd, 2011As 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
Is Leasing cheaper than paying cash?
Thursday, February 17th, 2011There is certainly an argument for using asset finance to fund equipment. The main reason I would say, is that cash is always better in the bank than tied up in assets. “Cash is King” as they say. I have seen many cash rich companies pay cash for assets and then due to a change in circumstances wish to refinance the kit because they have run out of cash. The problem is that to refinance equipment after it has been purchased is always far more expensive!
Equipment can be purchased either by Hire Purchase or finance lease.
There is an argument to say that leasing is more tax efficient as the whole of the monthly rentals can be offset against taxable profit, Therefore the full tax allowances are obtained over the same period of the lease. It can be argued that the return on the cash left in the business is greater than the cost of the finance lease less the tax benefit. At the end of the finance lease the business continues to pay a secondary rental or can obtain title via a third party. Anywhere between one or 3 additional monthly payments will need to be paid
Hire purchase has slightly different tax treatment whereby capital allowances are claimed on a reducing balance . An option to purchase fee is paid with the final payment typically £50 to obtain clear title
As a rule of thumb most accountants would recommended equipment and hi tech assets that have a limited life span and are regularly replaced should be financed on finance lease and long life assets be funded on HP. Each customer will be different and should really speak to their own accountant to determine the best way forward.
Trade finance explained
Wednesday, February 16th, 2011Trade finance provides the ability for a business to purchase wholesale goods on credit awaiting sale of the goods and therefore payment from the end user. There are several types of trade finance and this article tries to explain the differences which should help you decide which product or type of business is best for your business.
Firstly traditional high street banks provide trade finance based on the strength and performance of the business. We call this balance sheet lending and is based purely on the profitability and track record of your business It is more often than not nothing to do with the value of the goods you are purchasing and the security that they offer.
Secondly certain factoring and invoice discounting companies provide trade finance facilities on the back of an invoice finance facility however the goods in this instance must be pre sold. For example if you were inmporting Plasma TVs from China and you had an order from Costco for example it might be possible to obtain a complete funding solution. The factoring company will provide you with an import facility to purchase the TVs. On delivery of the TVs to cost and on raising an invoice a factoring facility will provide a further funding facility until Costco pay within the terms of the invoice. As factoring will only fund 80% of the end invoice the mark up on the imported goods must be at least 20% otherwise the invoice finance facility will not repay the trade facility.
Commercial Mortgages Explained
Monday, February 7th, 2011Commercial Mortgages are probably still one of the hardest business finance product to obtain. The following article explains why you can longer rely on the value of the property to obtain funding.
Gone are the days when you could get funding at 70-80% of the valuation without having to go through the in and outs of a ducks whats it. Nowadays it is all best of serviceability,cash flow and the quality of the tenant. By tenant we mean the business that is in situ and who ultimately will be paying the mortgage. The tenant could be the owner of the property or the lessee if the owner is sub leasing.
In the current economic climate commercial mortage lenders will only lend up to 70% providing serviceability is undoubted. If not they will lend up to a max of 70% but do some calculations based on profitability. We have seen many instances where a property has been valued at £1.0m plus however the serviceability has been an issue and funding was only achievable at 40% of the value.
Commercial mortgage lending is no different from any other type of lending. There will always be slight variations throughout the market. In addition different banks blow hot and cold in terms of their appetite for different sectors and industries. Different banks and commercial mortgage lenders do things is slightly different ways and as such it is worth speaking with a commercial mortgage broker who knows the market inside out. In addition they can collate all the right information that the different lenders require saving you valuable time and money.
