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Diverse Funding Options Grow for SMEs

Invoice finance is becoming more and more popular amongst small and medium sized businesses. In today’s unstable funding environment, getting access to funds as and when they’re needed is becoming more and more difficult, especially when the banks can’t be relied upon to lend to any business which could be perceived as ‘risky’ – as many smaller businesses are. However, in spite of tough conditions for businesses, the numbers of companies taking up invoice finance programmes is rising, showing just how valuable alternative finance models are to the UK economy.

As the lending environment continues to diversify, the abundance of traditional lenders is being enriched by an increasingly large selection of alternative finance lenders. The number of companies using alternative finance options such as invoice factoring continues to grow – in 2012, it grew by 4%, achieving total numbers of over 43,000 businesses according to the Asset Based Finance Association (ABFA).

The most popular form of asset based lending is invoice discounting, where the number of businesses using it increased from 17,300 last year to well over 18,500. The mid-market is making the most use of asset based ledning, recieving 68% of the total value of advances to businesses valued at £16 billion.

Invoice finance is a great way for companies to unlock extra working capital and cash flow, especially if your business is struggling with late payment problems. Any business who deals with customers on an invoice and credit basis could be eligible – many businesses within manufacturing, distribution and services such as recruitment use invoice factoring, but a whole range of businesses could be able to make use of such services.

As the UK funding environment continues to fail in delivering for SMEs, there’s more and more need for businesses to make use of alternative options.

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