When it comes to organising a factoring facility there are basicLly two choices a bNk owned factoring compnay is a decision of the bank but as we know the banks try and be all things to all men And they don’t necessarily five the best service. A independent factoring company is a business set up independently from the banks and they usually specialise in factoring alone and As such their service is second to non.
FActoring is all about adding value in terms of providing the most possible cash against your unpaid invoices. It is also about collecting your cash within 90 days in the most efficient and professional manner.
Therefore cheapest is not always best. There is Absolutely no point going with the cheapest quote if that particular finder cannot get the cash through the door . For example a number of bank operated factoring companies will only telephone your top ten customers and leave the rest to chance or to letter.
At XL Business finAnce we have plenty of experience in pointing our customers in the right direction. We would recommend no more than two or three ompanoes that will best suit your particular requirement. The companies that we recommend will be selected based on your location, turnover, quality of debtor book, length of time trading and profitability. Our recommends will be very similar in terms of business they are looking for but it will come down to personalities as go which one you choose. As soon as you start seeing more than two or three companies they will not all take you seriously and as such you may not end up with the best possible deal.
Archive for the ‘Factoring’ Category
Independent or bank owned factoring company
Friday, April 30th, 2010Factoring Contractual debt
Thursday, April 29th, 2010During the last week we received an enquiry via our website from a furniture manufacture needing to refinance some existing equipment to provide cash for working capital. Unfortunately the age of the kit meant that the value for refinancing purposes was very low and would nit provide enough cash. On digging a bit deeper it transpires that the customer had been told that they could not use factoring or invoice discounting and as such was struggling for working capital. Businesses which are involved in the construction industry or any other contractual business obtain payment upon application of work to date rather than by invoice. Whilst non of the high street banks are able to fund such applications the good news is that are one or two factoring companies that can indeed fund these applications. They have their own in house surveyors that have experience in all industries and they can verify that the applications are reasonable and accurate.
This is a very specialist area and as such the to funders who can provide such funding are very different financial institutions indeed. Which finance company is best for your business depends upon your own businesses individual circumstances. A brief survey of your business will help us to pint you in the right direction. Much of it will depend on the length of time you have been trading, how profitable the business is , turnover and the quality of your end customers. XL Business finance as 10 years experience in helping such businesses. Give us a call today!
invoice discounting vs factoring
Sunday, April 18th, 2010And the winner is! It depends!
Both an invoice discounting and factoring facility will release up to 85% of your unpaid invoices on a revolving credit basis. In theory both facilities will grow as your turnover increases providing you with valuable cash and working capital. In our opinion both are far better than a bank overdraft which is not as flexible and will be capped depending on how profitable or the level of security available.
Both factoring and invoice discounting charge an interest rate for the amount of money that you borrow which is comparable to a bank overdraft. If you don’t use the facility than there will be no interest payment. The rate of interest may vary from between one and a half percent over base to as much as three percent over bank base rate. Some finance companies charge their interest rate to Libor which at the moment doesn’t make much difference because both are about the same. Beware some finance companies charge a minimum base rate so you need to double check the small print.
The main difference is that factoring provides credit control whereas invoice discounting is provided in a confidential manner and provides a cash flow facility only. As such the service fee with a factoring company is usually higher than with invoice discounting. With factoring they will call your customers and ensure that payments are received within the ninety days permitted. Although the costs of factoring his higher for smaller businesses compared with the cost of outsourcing credit control it can be a very cost effective form of finance.
However if you are a new start business, have a small net worth or are having trading difficulties you are unlikely to be offered invoice discounting. This is because invoice discounting can be susceptible to fraud. As invoice discounting does not enable the provider to do any checks there have and will be cases of fresh air invoicing.
Factoring Finder
Saturday, April 17th, 2010There are so many options available when it comes to factoring finance. How do you know that you are getting the best possible deal. A good factoring broker will be able to recommend the best possible finance companies for your particular circumstances.
It makes sense to see two or three providers but if you get any more in then non of the finance companies will take you seriously. You may also find that your accountant will recommend a factoring company. We think this might be quite dangerous because most accountants will only have had experience of one or two finance companies. In our opinion most auditors are like GPs. They will have a general knowledge of most financial products and services but will not be able to pinpoint the best possible funders. Going to your accountant for factoring advice could be like going to your butcher for open heart surgery!
So why can a factoring broker provide the best possible advise. A good factoring broker will know all the different finance companies and more importantly they will know their different sweet spots. Not all finance companies can beall things to all men although the banks will try and tell you they are. Take factoring for example. Certain high street banks will only chase your top three debtors by telephone. The rest they do by post if they can be bothered at all. Other banks have their credit department , service department and collections department in different parts of the country. How can you get the best possible service? This is just one consideration that must be taken into account but I think it gets the point across quite nicely.
Turn your invoces into cash with debt factoring
Wednesday, April 14th, 2010As the economy heads out of recession many businesses will experience an increase in turnover. There are a few signs that this is already starting to happen in certain sectors of the economy. Go to the bank for an increase in bank overdraft in order to fund your working capital requirement and your request will probably fall on death ears. Thankfully invoice factoring can potential release up eighty five percent of your unpaid invoices within twenty four hours. In addition the amount and level of any factoring facility is not restricted by the strength of your balance sheet and any available security but by the amount of your outstanding invoices. The facility will grow with your business to give you the financial freedom that you require.
In addition debt factoring will provide you with a credit control service to ensure that your invoices are paid within the usual ninety day credit terms. The cost of providing such a service starts from as little as a few hundred pounds per month. And as your business grows the cost of such a service is potentially a fraction of the cost of employing a full time or even a part time credit controller. as well at the cost of the credit control an interest charge at a rate of base or libor is charged at a rate comparable to bank overdraft facility.
It must remembered that the provision of a full factoring facility is a value added service product and as such not all factoring companies are the same. The most important part of the service is ensuring your outstanding invoices are collected in a timely and professional manner. Not all finance providers provide the same level of service and as such it is important that the right finance company is chosen for your particular requirements. This is where XL Business Finance can te in and help your provide the most appropriate funding partner.
Factoring Explained
Monday, April 12th, 2010Factoring is fast becoming the most popular working capiatl facility proving a life line to many busineses. Factoring is the process of obtaining cash against your inpaid invoices typically up to 85% of the total amount. A specialist factoring company wil use the unpaid invoice as their security and if anything happens to your business the finance company will collect the unpaid invoices to repay the debt. Factoring or even invoice discounting is great for a business that has a turonover of over £100k and if yur businesss is growing fast it will provide to working capital to fund purchaases of new stock and pay those all importnat bills.
Costs vary depending upon the size of your debtor book, the number of invoices you raise on a monthly basis nd the work involved in colecting your invoices. Rememeber factoring is a value aded service in that the factoring company also provide you with crerdit control to collect and chase your invoices leaving you free to get on with running your business.
There are two parts to the costing for a factoring service. Firstly there is the cost of the money borrowed. This is comparable to a bank overdraft facility and is you charged at 1.5-3% over bank base rate or LIBOR depending on the finance company involved. Beware certain finance companies have a minimum base rate which could make thir headline rate be more expensive han it actually apears at first glance.
The second part to the charge is a service fee which is the charge in relation to the credit control part of the service. Depending on turnover, the number and the quality of your debtor book a small business with a turnover of over approx £100,000 may expect to pay a few hundred poundds per month. Obviously this increases a st eturonover of the business also increses. Remember that the service fee compared to the cost of employing a full time crdit controller is very competeitive.
Financing Imported Goods
Friday, March 19th, 2010Many businesses are seeking finance to enable them to import goods from foreign countries. Providing that the goods have been pre sold in this country it may be possible to get funding from start to finish by way of an international trade finance facility dove tailing against a factoring or invoice discounting facility.
Many of the high street banks will provide funding enabling business to import goods however many banks will provide a line of credit against the strength of the business in terms of profitability, strength of the balance sheet and the length of time the business has been trading. You must also bank with that particular banking institution and more often than not security such as charges against property etc is often required. Therefore as with most high street banks they can only provide funding for the customers with the best possible credit score.
This leaves a big gap in the market for businesses unable to obtain funding from the banks. Thankfully there are a number of independent based finance companies that are able to provide funding against the strength of your orders and documentation. Therefore funding is potentially available for new start businesses, companies that have declined by their banks or businesses with less than positive trading performances. Providing there is value in the goods that you are buying a trade facility will be provided for you to import your widgets etc and providing the goods have been presold a factoring o invoice discounting facility will dove tail and be used to repay the trade facility on delivery of your goods to your customer. Simple! Well in theory it is
Factoring with a poor trading performance
Monday, February 22nd, 2010Many business believe that they are not eligible for an invoice finance product because they have a poor trading history. This will almost certainly be the case if you require an invoice discounting facility. This might also be true if you approach a high street bank for either invoice discounting or factoring. The good news is that even if your bank has knocked you back for a factoring facility there are many independent factoring companies specialising in this area and they are able to take a more flexible approach to helping a business.
The problem with the banks is that factoring and invoice discounting is not really what they are about or it is not a core product. In our opinion most banks are a jack of all trades but a master of none. An independent grows its business on the back of the smaller and more challenging deal. It is willing to go the extra mile to assist a business. It understands that the sucess of running a factoring factoringcan be the difference between a business succeeding or failing. It also will take into consideration the quality of your debtor book which if it is of good quality it will certainly assist in obtaining a factoring facility.
Remember there are so many factoring companies to choose from and as such it can be a minefield when it comes to choosing the best provider for your business. A good independent broker will be able to narrow the oice of finance companies down to the best two or three saving you time , effort and money. WHICH ONE IS BEST FOR YOUR BUSINESS WILL DEPEND ON YOUR LOCATION, TURNOVER, QUALITY AND QUANTITY OF YOUR DEBTOR BOOK AND THE LEVEL OF ANY PROBLEMSWITHIN YOUR BUSINESS.
Factoring Finance explained
Monday, February 15th, 2010Factoring Finance is the means of obtaining cash against outstanding or unpaid invoices. Most factoring and invoice discounting companies will release up to 85% of unpaid invoices. On payment of the invoice the finance company will pay you the remaining 15% minus a small service fee and any interest due. The funding is usually provided for a maximum of 90 days however in some circumstances there are one or two finance companies that will provide funding up to 120 days. The factoring company will take a fixed and floating charge over your book debt and when you raise an invoice to your customer you request that the proceeds are paid direct to the factoring company and you provide their bank details. Factoring will also provide credit control whereby the finance company will chase your invoices on your behalf.
Once upon a time there was a stigma surrounding factoring and invoice discounting however it is fast becoming the preferred means to provide working capital and is recommended by many professional advisors as an alternative to a bank overdraft. The problem with a bank overdraft is that the level of the overdraft facility can be restricted by the length of time your business has been trading, its profitability and the amount of security available. Factoring will grow with your business and will provide you with a lifetime of working capital.
Beware not all invoice factoring companies are the same. Factoring is very much about adding value to your business. Not only does it provide the necessary cash flow but the credit control side is just as important. There is no point going with a really cheap provider if they are useless at collecting your cash. Thew banks only tend to phone the top one or two companies whereas the independents tend to specialise in this product and as such do a proper job when it comes to credit control.
How debt factoring works
Thursday, February 11th, 2010Debt factoring provides an alternative to a bank overdraft for cash flow purposes. Up to 85 % of outstanding debtors are releases as you raise an invoice. An overdraft will be restricted in size depending on the amount of aavailable security aavailable. A factoring facility will grow with the business and will provide a available source of working capital as a business grows. In addition a certain amount of credit control is provided in the process. A minimum charge for running a factoring facility is circa £2-300 per month. For a small business this may seem allot but compared with the cost of employing a credit controller we think it provides pretty good value for money. The minimum turnover to make it cost effective would be in the region of £80k per annum.
There are two charges for a debt factoring charge. First the interest rate for borrowing money is comparable to a bank overdraft. You will be charged at 2% over base or libor depending on the finance company. Beware some finance companies charge a minimum base rate and as such it is prudent to check the small print to ensure you are comparing apples with apples. The second charge is the service fee for providing credit control and debt collection. Although a bank based factoring company may offer a very cheap service charge they do not always provide the best service. Certain banks will only chase by telephone your top 3 customers leaving the rest to be chased by letter. Therefore debt turn is not always the best. A specialist factoring company will telephone all your customers and as a result get the money in through the door quicker. This aspect of the factoring service is very much about adding value to your business and as such the cheapest is not always the best.
