Lending

Amount of invoice financing received by small firms reaches four-year high

Fred Heritage | 20 July 2016 | 8 years ago

The value of finance lent to Britain’s small businesses via invoice financing has jumped by more than 60 per cent in the last 12 months, according to the latest statistics from the Asset Based Finance Association (ABFA).

As a result, the amount of invoice financing advanced to small firms has reached a four-year high of around 711m, up from 435m one year ago.

As the industry body representing the invoice financing and asset-based lending industry throughout the UK and Ireland, ABFA found the financing method which secures capital against the value of unpaid invoices to be increasingly popular amongst businesses of all sizes, but particularly Britain’s small firms.

Commenting on the findings, ABFA chief executive Jeff Longhurst said that invoice finance is now one of the primary ways that small businesses access funding.

The amount small business owners are securing via this route is also increasing. Between January and April 2016, smaller businesses received an average of 52, 000 in invoice financing, up from 32, 000 in the same period in 2015.

Longhurst went on to say: ‘since the credit crunch, accessing funding through traditional paths has remained challenging, and so the flexibility of finance options, competitive prices and the quick turnaround of decisions associated with invoice finance is a real draw for smaller business owners.

He added that invoice financing can help owners of smaller firms tackle challenges like expanding order books, boosting cashflow and managing debt.

There are two main types of invoice financing factoring and invoice discounting. Both methods enable businesses to release funds tied up in unpaid invoices, but factoring usually includes an added service element whereby the financier manages credit control and collections on behalf of a client.

Factoring is seen as arguably more suitable for smaller business owners, who frequently don’t have time to manage credit control and the collection process themselves. Invoice discount facilities, which make up the bulk of Britain’s invoice financing industry, involve client business owners managing credit control themselves.

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Topic

Lending

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