Popularity of invoice financing looks set to grow in 2012 in the UK, with more and more businesses looking to these alternative finance measures instead of turning to traditional lending methods such as overdrafts and bank loans. It means that late payment and cash flow issues can be combated, without companies taking on extra debt at high interest rates. Understandably, it has been praised by the government as a way for SMEs to recover and grow in our harsh economic environment – and it’s easy to see why.
Growing Invoice Finance
A new survey by the Asset Bassed Finance Association has shown that invoice finance is set to grow 9% in popularity in 2012. This means that the total funding provided by the sector will reach around £17.2bn in 2012.
This sounds an impressive figure, but even the failed Project Merlin initiative with the banks lent over £70bn – and banks still provide 80% of financing to the small business sector. In order to make a bigger impact for SMEs, there needs to be more awareness of the alternative finance options out there.
The optimistic growth figures for those companies using invoice and asset based finance show the reasons for needing these alternatives in the sector. Amongst disappointing growth figures, the turnover of businesses using asset based finance look to grow 12% on 2011, up to £259bn.
The number of clients using invoice finance looks set to expand as well. Whereas the first port of call might always have been loans and overdrafts, now it looks like nearly 45,000 companies will be using invoice finance before the year is out. This is an increase of 7% on 2011, again showing its growing popularity.
However, with UK growth figures downgraded to 0.8% in 2012, it still looks to be a big ask for any SME to show positive steps towards growth. Alternative finance is being taken up on a wider scale, which shows that businesses are looking outside the traditional routes in order to fund growth as well as their day to day running. This is an encouraging sign, even in such a harsh economic environment.