According to recent research, 31% of small businesses believe that invoice finance is not more widely used because it is not promoted enough and SMEs don’t even know that it’s an option. Though this is a trend that’s starting to change with the government’s promotion of factoring services as a key way to plug the lending gap, there is still a lot of knowledge that’s lacking within the small business community.
However, 18% of the businesses interviewed believed that it was not more widely used because it is easier to use loans or overdrafts. This links to the lack of knowledge within the small business community – if businesses have only vaguely heard of invoice finance, they won’t realise that it really is a viable option.
Indeed, businesses in the know about invoice finance will realise that it’s a flexible and accessible way to address cash flow problems. Factoring services for small businesses include a credit control system supplied by the lender, meaning companies won’t have to expend man hours chasing customer debts. Unlike loans or overdrafts, invoice finance also grows in line with your business – if you’ve got bigger sales, you can factor more invoices and borrow a greater sum from the lender.
Similarly, with the banks making lending requirements all the more strict, invoice finance is becoming more mainstream. Whereas in previous years it may have been regarded as a last resort, it is now shedding this image and is being used by all sorts of companies, from established, successful businesses looking to grow to start-ups navigating their way through their first years of business.
While many companies might still not know what’s out there in terms of alternative finance, in tough economic times it’s the ones that do the extra leg work that will be able to take advantage of the opportunities that are out there – and which can help your business to grow.