Monthly Archives: July 2017

Understanding UK Bridging Finance

Bridging finance, also referred to as “bridge loans” and “bridging loans”, have nothing at all to do with re-constructing the London Bridge. Bridging finance is typically a short-term loan that a business uses to supply cash for a real estate transaction until permanent financing can be arranged. The word “bridge” conveys the fact that the loan is designed to get you over a temporary obstacle. A typical use for a bridge loan is to cover situations such as when a company needs to close on a new office building before having sold their old one. They would use the proceeds of the bridge loan to continue making payments on the old building until it is sold.

Bridging finance almost always requires that you pledge some sort of collateral as security against the loan. You could offer up commercial or private real estate that you own,or are in the process of buying, machinery and office equipment or even existing inventory. If you have outstanding business and personal credit, as well as an outstanding relationship with your lender, you might be able to secure your bridge loans on just a signature.

Because the need for bridging finance sometimes arises suddenly and without warning, it is a good idea to establish a relationship with a lender before the actual need arises. When you do this you can arrange to be pre-approved for a specified loan limit. Later, when the need suddenly arises, you won’t have to wade through all of the red tape. The typical term for a bridge loan runs from a fortnight to as long as two years. Of course, any terms can be negotiated and a motivated lender will work hard to match your needs.

Since bridging finance usually lasts for a relatively short period you may find that the interest rate you are being asked to pay is slightly higher than a more conventional type of loan. Lenders make their profit by charging interest across the life of the loan. The shorter the loan period the less interest they earn. As a result many lenders will often boost the rate by a 1/2 point or more. In general, the length of the loan, the amount of risk that is present for the lenderArticle Search, the quality of your credit history and the liquidity and value of your collateral all are used to help determine the interest rate.

Your best bet for securing a bridge loan at the most favourable rates and terms is to work with a qualified UK Commercial Mortgage Broker who understands the ins and outs of bridge loans. That way you can get your application in front of as many lenders as possible and end up with several who are willing to compete for your business.

Ways to Measure your Finance

There are several ways to measure finance. This is done to ensure that the business is doing right and is meeting its financial targets. Sometimes, this is measured in a monthly basis. In some companies, there is a quarterly business review in which the gains and losses are measured and from these data, action plans can be formulated that will specifically target pain area in the company that significantly impacts the financial aspect of the business.In many cases, corporate leaders measure their financial status by also measuring their company’s net worth.  This is a data driven approach that helps them drive the business and forecast how the rest of the fiscal year will be. The first thing to do here is to list all the largest asserts of the company. It is important in this part that the estimation of the assets’ worth is close to reality.  After this, the liquid assets are added. These assets include the cash available in bank accounts, whether they are savings or checking. Once all these are added, you now have the total assets.What needs to be done next is to calculate the liabilities of the company. Of course, this includes outstanding loans and leases. This may include mortgages if the company has not fully paid for its infrastructure.

Add to these the direct debts of the company if there is any. Once this is done, the total liabilities of the company is identified. The liabilities should be subtracted from the assets to calculate the net worth of the business. If this hits negative, this means that the company is not in a smooth sailing status.Another approach to measuring financial growth is through the calculation of investment performance. This can be done to manage assets and make a financial forecast based on historical data and financial analysis. The first thing to do here is to set a timeline. Many companies do not measure financial strength on a monthly basis. What they do is to measure it quarterly but some may do it annually. For small scale businesses, a monthly assessment may be done to manage the business better. This is especially applicable to startup businesses.Records of the findings should also be kept. This is because financial analysis is not as simple as subtracting the difference between two figures.

When in business, there will be a definite series of cash flow that will happen. This may be about taking funds out or putting funds in. either way, this will impact how the earnings are interpreted. In a simple scenario, let us say that $1000 was placed as a capital in an investment. After two months, the total asset has ballooned to $5000. However, on the second month, $3000 was added to the original investment. The question here is, did the company earn $1000 form the original investment or when the $3000 was added?OverallFree Reprint Articles, to measure finance is to measure the business. Whatever comes out on the measurement is where the ultimate decision will be based. Directions will be taken and new approaches will be tried.

Trade Finance Alternatives for Export Companies

Are you selling goods or services to companies in other countries? Although expanding your company beyond your national borders is very exciting and profitable, it will also subject you to the payment habits of your foreign customers. Many times, customers can take as long as 60 days to pay for their goods. Although large export companies can wait that long to get paid, most small and medium sized businesses can’t. This creates a cash flow problem. Of course, you can always ask your customers to pay you immediately by bank wire as soon as the invoice is presented. However, few customers will abide by that request and you risk loosing business to the competition.
Going to the bank to get a business loan or bridge financing may help, if your business is established, can provide three years of financial statements and if your personal credit is stellar. But, what if you don’t meet banking criteria? Or are a startup? Then you should consider trade finance.

Trade financing enables you to finance your local and foreign sales and can provide the working capital that your company needs. Accounts receivable factoring, a popular trade finance tool among exporters, allows you get paid for your export invoices in as little as two days. It eliminates the 60 day payment wait and enables you to get your paid immediately. This provides you with working capital to pay suppliers and employees. Export factoring is relatively simple to use and integrates well with most companies. It works as follows:
1. You deliver the goods or services to your foreign client and send an invoice

2. You send a copy of the invoice to the factoring company

3. The factoring company advances you up to 85% of your invoice as a first installment

4. One your invoice is paid, the factoring company will rebate you the remaining 15% as a second installment, less their fee
No two factoring companies will price an opportunity the same way, however most factoring rates go from 1.5% to 3.0% per month. Rates vary based on the commercial credit quality of your clients, your industry and the amount of financing that you need. As opposed to most trade finance solutions, factoring is easy to obtain and can be setup in a few days. This makes it an ideal solution for small and midsize companies.

Business Finance through invoice discounting and factoring

Business Finance through invoice discounting and factoring.

In the current economic downturn with many banks’ unwillingness to lend, businesses are finding it difficult to raise money to finance their activities using traditional sources such as an overdraft, credit card or loan facilities. Faced with this situation, many companies are turning to sources of income such as factoring and invoice discounting.

With factoring and invoice discounting, cash flow is improved by borrowing against invoices. Using this facility the company is usually able to access 80% of the invoice value immediately without having to wait for the normal payment period. There are three main ways to do this:

  • Invoice Factoring– The process of invoice factoring generally involves a bank (normally known as the Factoring company) taking over a company’s invoicing and credit control function. The factoring company makes credit available on raising the invoice. The name of the factoring company is stated on the invoice and the payment of the invoice is made directly to the factoring company. The factoring company will often manage payment collection and credit control.
  • CHOCCs Factoring– CHOCCs stands for Client Handles Own Credit Control. This type of factoring is similar to full factoring except that the client maintains responsibility for collecting payment of the invoices. It has the advantages that it will normally be a cheaper service and more control is maintained over the payment relationship with the company’s clients.
  • Invoice Discounting– Invoice discounting is similar to factoring in the sense that a factoring company will make credit available to the business as soon as an invoice is issued. But in this case the service is much more discreet. The company sends out invoices and collects payment in the normal way, but the factoring company’s name does not appear anywhere and debtors will therefore be unaware of their involvement.

Which factoring option should you use?

This depends on the nature of your business. For example, where it is important to ensure that the involvement of a factor is not disclosed, invoice discounting may be a more appropriate method. Where this does not matter or in fact where it is seen as an advantage to involve a third party to help in the collection of debts, then full factoring may be the correct solution.

Of course, for invoice discounting to be made available, the factoring company must have the confidence that the business it is lending to will be able to tightly manage its debt collection processes. For a full invoice factoring solution, up to 80% of the value of an invoice may be made available on the day it is raised. However, as invoice discounting is perceived as a greater risk to the factoring company as they have less control, smaller amounts may be made available using this solution.

Invoice factoring or discounting is an ideal way to improve cash flow based on business already happening, and for it to work the business has to be raising invoices. However it can also be an ideal solution to help improve the cash flow position of a new business such as a Phoenix company. Here invoices will start to be raised almost immediately and so a factoring facility could be used.

Because Invoice factoring or discounting focus on cash flow improvement, they are not generally regarded as appropriate methods of raising a lump sum for a specific business project. If this is your requirement and a bank loan is not available, then a more suitable option may be asset refinance.

So what is the cost of Invoice Financing or Discounting?

Normally both options involve a service charge (which may be between 0.5% and 1% of the sum lent) and a rate of interest. However, where a business is looking to improve cash flow and more tradition methods of achieving this such as bank overdrafts and credit cards are being withdrawnArticle Submission, invoice financing and discounting is often an extremely useful solution.