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Archive for the ‘invoice financing’ Category

GOVERNMENT SUPPORT FOR BUSINESS

Wednesday, April 1st, 2020

There are a number of schemes available to UK businesses during this time of uncertainty.

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
xlbusinessfinance.co.uk

How to choose an invoice financing company

Sunday, May 9th, 2010

Without a doubt invoice financing is still the most buoyant and flexible form of business finance today. However there are so many different invoice financing companies and products  to choose from how can you be sure that you are using the most appropriate and best value funder for your business. Luckily XL Business finance has been helping businesses for over ten years to choose the most appropriate funder.

Too often the easiest option is to be  railroaded into your clearing banks factoring or invoice discounting company. This may not always be the best option. As you probably know factoring and invoice discounting release up to eighty percent of a businesses unpaid invoices in ready cash ready to be used for working capital requirements.  However there a number of factors that need to be taken into consideration when choosing a finance company. Like any business different factoring and invoice discounting companies have different sweet spots. The problem with the high street banks is that try and be all things to all men and can often fall short on service and delivery compared with other independent providers. In certain circumstances the bank may be the best choice and indeed one bank in particular is exceptional providing international trade finance whereas another is most excellent in providing funding against contractual debt.

In addition certain finance companies are most excellent at invoice discounting but struggle to add the required level of service to deliver a competent full factoring service. When it comes to full factoring with credit control and debt collection specialist and independent factoring companies provide a far superior products to the banks. It can be difficult to argue against the banks when it comes to invoice discounting however there are benefits to choosing a third party provider such as not having too many eggs in ones basket.

A Guide to Invoice Financing

Wednesday, May 5th, 2010

Again Invoice financing is a generic term for factoring and invoice discounting all of which provide funding against your unpaid debtor book. Because invoice financing is secured against your debtor book it is a very flexible form of finance that grows with your business. It is fast becoming the first choice cash flow facility for many businesses replacing bank overdrafts which by comparison are restrictive in terms of proving cash and onerous in terms of security and flexibility.

Invoice discounting is usually provided in a confidential manner and is normally appropriate for businesses that are established , profitable and have good internal credit control procedures. Most invoice discounting companies will release up to 80% against your debtor book with the remaining 20% being paid to you when your customer pays less any charges due.  There are usually two charges for the operating the facility. Firstly there is the interest charge , an amount over bank base rate which is applied to the amount of cash you actually borrow and not the facility amount. The rate is usually comparable to a bank overdraft and in some cases can actually be cheaper. The second charge is for operating the facility and this is charged as an percentage of actually turnover. The amount charged depends upon the turnover, the number of invoices and also the quality of your invoices. Most invoice discounting companies have a comparable charging structure.

Factoring is usually provided on a disclosed basis SO that your customers are aware that you are factoring your invoices. Because factoring finance is provided in a more open format it is usually available to most businesses including new starts , loss making businesses and businesses that have been declined invoice discounting. The facility is provided in exactly the same way however the factoring company will be responsible for credit control and will add value to your business for making sure that your invoices are paid on time.

Invoice Financing Explained

Monday, April 26th, 2010

The ability to obtain cash against your unpaid invoice can have a massive affect on your businesses cash flow and hence your ability to trade. Invoice financing is the generic term for factoring and invoice discounting both of which will release up to 80% of your unpaid invoices. The remaining 20% is paid when your customer pays you less any charges due to the invoice discounting company. As cash becomes more and more tight we understand that credit terms are being stretched further and further. Invoice financing is the perfect solution to ease your Cashflow and unlike a bank overdraft the facility is not repayable on demand and will grow with your business.

However there is a subtle difference between factoring and invoice discounting. Whilst both products release cash against your total debtor book factoring usually provides credit control as an additional service and invoice discounting is usually provided on a confidential basis. Which facility is best for your business depends on your own requirements and trading performance. XL Business Finance is one of the countries leading factoring and invoice discounting brokers and we have been helping businesses for over ten years obtain the most appropriate funding partner. You wouldn’t go to your butcher for open heart surgery so why go to your bank for finance advise. We believe that we are more qualified and better placed to help a business choose the best funding partner.

As invoice discounting is usually provided on a confidential basis this means that your customers are unaware that you are discounting your invoices. The finance company is unable to call your customers and verify the amount of your invoices. therefore invoice discounting is deemed to be a more risky facility and as such is usually only available for profitable more established businesses that have th necessary controls and procedure in place. Factoring however is conducted in a more open way and as such the finance company can call your customers to check invoice amounts and as such it is a facility more widely available.

Invoice Finance or bank overdraft for an SME

Thursday, April 22nd, 2010

It appears that a bank overdraft as a means to financing a businesses cash flow requirements is becoming second place behind invoice financing. For starters it appears to be more and more difficult to obtain an overdraft. For many businesses it may be that they can obtain a token amount of £10-£20k and this may depend on the length of time a business has been  trading and whether it is profitable or not.

An invoice financing facility such as factoring or invoice discounting is secured against the unpaid invoices of the business. As a rule of thumb you can obtain 80% of your unpaid debtor book on a revolving credit facility. Therefore as your business expands so does the size the available facility. And it doesnt matter how the performance of your business fluctuates it is not repayable on demand.

The problem with a bank overdraft it is repayable on demand. Up until the last year or so it was virtually unheard of  for a bank to withdraw an overdraft. Not any more . We are often hearing of situations whereby an overdraft is being reduced following a poor set of results. This will never happen with an invoice financing facility which isn’t repayable on demand. In addition once you get on with a bank overdraft it may be difficult to move away. The bank may offer you a factoring or invoice discounting  in addition to your bank overdraft however we often see the total facility being restricted. You may find that you may have had more funding using an independent factoring company or invoice discounting facility that specialise in invoice financing. Beware!!!!!

Invoice financing contractual debt

Friday, April 2nd, 2010

Approach most invoice financing companies for a factoring and invoice discounting facility and as soon as they realise there is an element of contractual debt they run a mile. The good news is that there are one or two finance companies that specialise in financing contractual finance.

They are two completely different finance companies. One is a bank owned invoice financing company and the other is an independent based invoice discounting company. ie they are not bank owned. Compare any of the two quotes and you will probably find the bank owned invoice discounting company is slightly cheaper. However in our experience the bank owned finance company may not give the best service. Being a bank you will probably find they have more inexperienced staff. Not say they all are but it will be pot luck as to the level of service you obtain. The bank will probably quote a higher pre payment but as we know with any part of contractrual invoicing what you invoice isn’t necessarily what you get paid. This is where the problems start. A larger financial institution will have greater difficult reconciling payments and you end up with disallowed invoices and possibly less cash in the bank

Whilst no one funder is perfect the independent will understand that payments coming in through the door do not always match up but they have a far greater experience in reconciling the accounts. It might also be that whilst the independent quotes a lower prepayment you end up with far more cash in the bank. The independent will base their prepayment on advice from their in house quantitative surveyors and whilst a  lower prepayment might not be ideal it will also protect the directors by not exposing themselves too much from a personal point of view.

Small Business Invoice Financing

Friday, February 19th, 2010

Invoice financing provides cash against your unpaid invoices. Most factoring and invoice discounting companies will release up to 95% of your newly created invoices immediately with the remaining 15% being paid when your customer settles the invoice in full. For small businesses that might find it difficult to obtain a bank overdraft invoice financing can provide much needed working capital. As mentioned in previous blogs not all finance providers are the same and this is even more relevant when it comes to a small business choosing the right invoice financing company for their business. XL Business Finance has been helping small businesses for over 10 years obtain the most appropriate and flexible financing solutions.

Factoring can be obtained with a turnover of not much less than £100k per year. There are a number of small businesses which specialise in providing factoring services to the smaller business so it is always worth approaching one of these companies. Some of the larger independents are also very approachable and provide a quality service. With factoring our recommendation would be to choose a factoring company which is local to your business and one that actually specialises in factoring. Factoring is very much about adding value because not only does it provide cash against your unpaid invoices factoring also provides credit control leaving the owner with time to do other things. For this reason we do not tend to recommend the banks for factoring as it is more of an add on product than anything else.

For a small business it is more difficult to obtain a confidential invoice discounting facility. Traditionally invoice discounting has only been offered to business with turnover of £1.0m plus. However there are one or two invoice financing providers that will prefer to offer invoice discounting.  It all depends on how long the business has been trading, the previous track record and the systems and controls the business has inplace for credit control.

Invoice financing and trade facilities

Monday, February 8th, 2010

Invoice financing can provide  much needed working capital however when combined with an international trade finance facility the two  facilities dove tail to provide the complete funding solution. Any businesses wishing to import goods from a foreign country can do so without having to use any of their own capital provided that you have guaranteed orders in the UK. On trhe back of these orders the finance company will provide the cash to import the goods. As soon as the goods are delivered to your customers premises, you will raise an invoice. Either the customer pays immediately and the trade facility is repaid in full or you provide your customer with credit and the same finance company provides an invoice discounting or factoring facility against your invoices and the proceeds are used to pay the trade facility.

This process would seem pretty simple however not all financial institutions provide the two services together. If you went to the bank asking fro a trade facility the amount of credit you are provided with will depend on the length of time your business has been trading, how profitable it is, and the level of available security. Providing a one stop shop is difficult in that it is a very specialist market however once you know which funders are in the market you might be pleasantly surprised as to the level of funding available.

XL business Finance has been helping many businesses trading internationally with cash flow solutions. We know depending on your location . length of time in business and the level of profitability which invoice financing company will be best suited for your particular business. The good news is that you don’t necessarily have to have a stack of security available. Thankfully there are a number of independent finance companies that providing the exit route is watertight they will take a commercial view.

How to choose an invoice financing company

Friday, January 29th, 2010

Ok so we have established over the last few blogs that as the UK emerges out of the recession that using banks for working capital funding and in particular bank overdrafts is probably not the best form of finance. However there are so many invoice financing companies available how do you know which one will suit your particular business and who will give you the best deal. There are many factors that should be taken into consideration when choosing a provider. First there is a big difference between invoice discounting companies and factoring companies. The finance companies that are good at factoring are not always good at invoice discounting and visa versa.

Although both financeproducts will release cash against unpaid invoices of up to 80% factoring is more more of a service orientated product providing credit control as an added benefit. The idea is that you outsource this to the factoring company who will chase your customers and make sure the cash comes back to the business in a timely fashion. The cost of the factoring service is minimal compared with employing a full time credit controller. However with factoring cheapest is not always best. Although there isn’t a massive amount of difference between costs you do tend to get what you pay for. If you pay peanuts for a facility you will probably get monkeys chasing your customers if they can be bothered at all.

The service aspect is less important when it comes to invoice discounting however the bigger the financial institution the further you are away from a decision maker there if you need some flexibility a smaller company can provide quicker turnarounds. Confidential invoice discounting as it suggests is kept secret from your customers and it provides a working capital facility that unlike a bank overdraft grows with your business.

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