Commercial

Invoice Finance and Factoring

Do you sell goods and services to other businesses?

Having made a sale do you then have to wait for up to 90 days for payment?

Invoice Finance can release up to 95% of funds tied up in invoices, with money released to you within 24 hours.

At a time when many banks won’t provide funding, Invoice Finance can provide a much needed cashflow injection. This is usually by way of a permanent facility with an agreed credit limit, however raising funds against a single invoice with no requirement for a long term contract is becoming increasingly popular.

Cash is usually the most vital resource for businesses so effective cashflow management is essential. Invoice Finance, often known as Factoring or Invoice Discounting, provides access to your cash now.

It is suitable for most industries including manufacturing, distribution, transport and recruitment amongst others. Whether you are established or just starting out, a management buy in/out, a phoenix company, part of a pre-pack arrangement, or simply looking to refinance an existing facility, we can arrange a package tailored to your specific needs.

Don’t worry if you have a poor credit history. Funding is based on your debtor book so lenders are more interested in your customers’ ability to pay than your own financial performance.

Choosing the right funding package isn’t always straightforward, as there are various elements to the overall pricing. Simply choosing what appears to be the cheapest quote isn’t always the best option, as there may be cheaper options once extra costs are taken into account. We do this work for you as we understand the detail of what is being offered.

Our funding partners are trusted, reputable and experienced, the quality of service they offer is often as important as the terms of the finance package.

We can help you choose the one that’s exactly right for your business. Preferential rates and fees are also available exclusively to HLP and our clients from time to time.

Asset Finance

Most businesses need some form of equipment to carry out their day to day activities, whether that is Vehicles, Computers and other IT equipment, Plant, Machinery or many other item types.

Finance packages are available to not only to purchase assets but also to raise capital against assets you already own, thereby releasing cashflow into your business. The funder essentially buys the asset from you for cash then sells it back to you under a finance agreement, so you continue to have use of it in your business.

The sheer range of options and finance packages available can be bewildering, we have provided a brief outline of some of the finance types below but the best option is always to speak to an experienced specialist in this type of funding. 100% of the purchase price of an asset is available in man instances.

Hire Purchase

This allows you to spread the cost of the asset, and also become the owner of that asset at the end of the repayment term.

Repayment plans can tailored to suit your budget, and if you have any seasonality in your business this can be built into the repayment structure.

Leasing is essentially a contract between a funder and a customer that gives the customer the use of the asset in return for a rental payment over an agreed time period.

Leasing

This provides you with the equipment you need, but without the responsibility of ownership. Once the lease period ends you can either return the asset or take out a secondary rental agreement to keep it in your premises. One of the principle benefits of leasing is that a repayment schedule can be tailored which matches the income generated from the equipment itself, so pressure on cash flow can be alleviated if not avoided altogether.

Pension Scheme Borrowing

Many people aren’t aware that you can borrow through your SIPP (self-invested personal pension) or SASS (small self-administered scheme) when purchasing or financing Commercial or Semi-Commercial Property.

Borrowing through your pension scheme can be a very efficient and valuable way to purchase and finance commercial property, whether for your own trading business or investment. However before deciding to progress with any such application, it is important to fully understand the criteria available and also take suitable tax advice on the implications of your plans.

Key Points

Not all lenders support borrowing through a pension, therefore it is important to work with a specialist broker who understands the terms available from the whole of the market.

Debt is available up to 80% loan to property value for where the pension owner’s trading business will be the tenant (100% in certain specific sectors) or 75% loan to property value for investment purposes.

This is however subject to certain legal limitations such as the borrowing being no more than 50% of the value of the fund. Please see below for more details.

Borrowing through a pension is only for commercial property; the tax implications of holding residential property in such a fund are punitive and undermine any of the commercial benefits of doing so – every potential borrower should take appropriate advice from their tax professional and pension scheme manager/administrator.

Where you already own a commercial trading or investment property, borrowing through your pension could allow purchase of that property from you/your business and can potentially be similarly tax efficient.

How much can my Pension Fund borrow?

The pension scheme can effectively borrow up to a maximum of 50% of the fund value. Any debt secured will be restricted to no more than 50% of the fund value irrespective of the loan to value or the value of the property being financed.

The funding amount available is also limited against the property value as with any standard mortgage transaction, maximum debt being dependant on the respective Lender’s criteria for that specific asset or business class and the serviceability demonstrable from trading accounts of the pension scheme owner’s business or 3rd party rental income respectively.

One point which is important to note for all property purchases into the pension fund, the value of fund used for the 50% calculation is that in place before the value of the new property is considered, i.e. if the pension fund is valued at £200k and the property to be purchased is £400k, the pension fund can borrow a maximum of £100k.

What does this look like in reality?

Case Study 1

Trading business currently rent their premises and wish to purchase a unit in which to move their business and trade from. The husband and wife owners of the business wish to buy the property in their pension schemes and rent the asset back to their business.

Pension Fund(s) Value: £200,000

Commercial Property to be purchased: £300,000

Facility available from the Bank: 80% of the asset value = £240,000 however this is limited to 50% of fund value, therefore £100,000

Purchase of £300,000 met through £200,000 held in the pension fund and £100,000 commercial mortgage.

Case Study 2

IFA firm own and occupy their office premises, the asset held in the limited company name. Under suitable tax advice, the shareholders decide to move the asset into their pension scheme, releasing funds back into the company balance sheet to be reinvested and hold the commercial property in a tax efficient manner, also providing future rental income from the lease to be put in place between their pension scheme and the trading company.

Pension Fund(s) Value: £500,000