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Business Overdrafts, Invoice Factoring & Discounting, Trade Finance and Asset Finance

Understanding Business Overdrafts

Increasing falls in interest rates have made overdrafts the most popular form of borrowing for British business. A recent report from Grant Thornton found that nearly three quarters (72%) of British businesses turn to this form of financing over other available methods.

Should you be basing your financial strategy on your business overdraft facility?

Brumark The recent "Brumark" ruling in New Zealand dictated fixed charges as part of a debenture were to be treated as non-preferential debts in the case of insolvency. This ruling is expected to be adopted in the UK in near term.

Impact of Brumark Banks are less likely to offer an overdraft under this ruling but invoice finance companies do not have an issue as they assume legal title to a debt they are funding. Banks will start to favour this lending type more while the big advantage to you is invoice finance is completely flexible while overdrafts need to be negotiated, are fixed finance lines and charge higher interest rates. In addition credit management and debt collection are provided if needed.

Invoice Factoring | Invoice Discounting

Overdraft Alternatives: Trade Finance

If you are buying in goods or materials (UK & abroad) to sell on you will need to fund the trade somehow - most companies don't have the financial structure to fund these trades and if you have a larger order than normal (cheaper supplier deal or a bigger sales order) it may be very hard to finance. Trade finance will help you fund this transaction

  1. You are awarded a contract for £140k and source your stock (value £100k). You are invoiced for the stock.
  2. You send the invoice to your trade finance provider who pays the stock provider directly.
  3. Stock delivered to you and you have legal title to it.
  4. You deliver the finished goods and raise an invoice.
  5. Your trade finance provider releases 80% of the invoice: £100k to pay for stock and £12k to you.
  6. When the full invoice is settled you are paid remaining profits minus the trade finance charge.

For this you will be charged a fee for the transaction plus an interest fee for the loaned sum. Trade finance can be used alongside all other types of finance and is a line of credit your bank will not need to know about.

Trade Finance | Asset Finance

Business Finance Newsletters

Q2 Factoring Update - 09.06.2004
FSB states 25% of businesses fail but what can be done?

Brighter Outlook for Small Business in 2004 - 17.12.2003
Small Business Outlook Brightens

Government Initiative to Save SME's over a Billion on Energy Costs - 25.11.2003
ME's Waste over a Billion on Energy Costs

Protect Your Business Against Rising Rates - 12.11.2003
Ways to Protect Your Business Against Rising Rates

Interest Rates Rise by 0.25%: What it means to you. - 06.11.2003
Impact on Your Mortgages

Q4 Factoring Update: Brumark Bites - 04.11.2003
How Brumark will affect you and an invoice finance glossary

SME Economic Confidence up 22% - 28.10.2003
SME business confidence report and buying vs. leasing property guide.

Rising Crime Affects a Quarter of UK Businesses - 15.10.2003
Covers crime and how it effects UK business. Also includes finding the right finance for your business.

Invoice Finance - Easing Cash Flow Concerns - 01.10.2003
Report from The Factors and Discounters Association plus info on invoice disounting and lease financing.

Quarter 3 Insurance Update - 25.09.2003
Insurance update.

Small Business Owners Relish Their Freedom - 18.09.2003
Poll shows majority of small business owners would not work for someone else.

Q3 Mortgage Update - 11.09.2003
Trends in buy to let mortgages and commercial mortgages

Tailored solutions for your commercial vehicle needs - 04.09.2003
Report on commercial vehicle purchasing, financing and insuring.

Sources of Red Tape Plaguing UK Small Businesses - 26.08.2003
Poll shows red tape plaguing UK small businesses, plus tradesman insurance and equipment leasing.

Quarter 3 Factoring & Invoice Finance Update - 20.08.2003
New invoice factoring and invoice discounting partners, and switching from one Ffctor to another

Understanding Business Overdrafts - 06.08.2003
Business overdrafts and the alternatives.

Our Quarterly Mortgages Update - 28.05.2003
Trends in buy to let mortgages and commercial mortgages

Business Finance Online Info Centre

If you need more information on a particular product or service before investing/purchasing, try consulting our useful business finance reference section.

NB: The information on this business-finance-online.co.uk is for informational purposes only and should not be treated as business, financial, or any other form of advice.

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