When you’re deciding what small business funding options are best for your business chances are loans and overdrafts will both be things to consider. However, in an attempt to get more businesses using invoice finance services as opposed to traditional bank lending, ABN AMRO Commercial finance has today announced a £250m Business Overdraft Scrappage Scheme, encouraging more SMEs to step away from that overdraft and towards alternative finance.
The scheme allows SMEs to ‘try out’ invoice finance for six months to see if it’s more them, with no commitment at the end of the period. This is a valuable opportunity – research has suggested that small businesses are finding it hard to stay on top of their finances due to the fees and interest attached to business overdrafts so now might be the time to scrap yours.
Using overdrafts to cover cash flow deficiencies can quickly add up to big expenditure on interest payments. Overdrafts tend to be easier to access than loans, and therefore businesses being rejected for other types of lending often fall back on their overdraft. However, this is a dangerous trend – banks are increasingly unable to guarantee consistent funding through overdrafts, and many businesses find their fees and conditions become more and more unfavourable.
If your business is relying on its overdraft a bit too much, it could be worth giving this scheme a try. Invoice finance as a whole is a vital part of the small business lending environment. Factoring and invoice discounting can unlock flexible funding by releasing the cash tied up in unpaid invoices, thus solving late payment and cash flow problems. If the UK is going to achieve the grow figures projected for 2013 then recovery in the SME sector is highly important – and getting access to funding is a hugely important part of this. Invoice finance can help.