Commercial Finance

There are a number of options available to a business seeking to raise finance from a commercial source, they include Bank Overdraft, Factoring and Asset Finance..

Bank Overdraft

This is the most popular option, but is not always the best. It has the merit of simplicity but because it doe not usually have a fixed term and can be called in by the bank at short notice it is only suitable for working capital. The high street banks have strict rules relating to the granting of overdrafts with each bank having a slightly different emphasis but in general, irrespective of which bank is being approached, it is likely that the Bank Manager will want to see evidence of the following

A comprehensive and well presented Business Plan, with detailed Profit & Loss Projections and detailed Cash Flow Projections showing the amount of borrowing required and how it will be used and confirming the business' ability to service the overdraft

Robust internal financial controls and an understanding of the business' marketplace - its position within that marketplace and the competition

For a business with a trading history he would also expect to see management accounts

Invoice Factoring

Invoice factoring can dramatically improve cash flow in the right circumstances. Because it is directly linked to sales invoice factoring or invoice discounting can be effective ways of funding growth as the amount you can draw down (usually up to 80%/85% of the value of the approved invoices) grows in line with sales growth.

This form of finance is very flexible and unlike overdrafts does not require regular re-negotiation and arrangement fees. On the down side however, factoring can be an expensive way of raising finance. Usually there is a fixed monthly factoring fee plus a charge of around 3% - 5% over base on all monies that have been advanced (drawn down ahead of debtor settlement). In addition there will be a service charge based on gross turnover.

Asset Finance

Asset Finance is specifically geared to provide finance for the acquisition of new assets for your business. Our contacts in the finance industry can provide a range of products to suit individual business requirements including traditional hire purchase where the asset belongs to the business and its purchase is financed over a medium term period - typically 36, 48 or 60 months and leasing where the business gets use of the chosen asset and pays leasing rentals over an agreed term - with this type of finance the rentals are business expenses rather repayment of a debt and so have no effect on the business' ability to obtain credit.