As the banks continue to fall short of funding targets, invoice finance is looking to be an important part of ensuring business recovery in 2012. Small business funding needs a boost to combat long term lending short falls, and invoice discounting and factoring look to be one way to achieve this.
The level of invoice financing in Britain and Ireland rose by 7% in 2011 – however, the overall lending rate fell by 3.7% in the same period. This shows that in a funding climate which is harsh to small businesses, they are still able to find funding from alternative sources to the traditional bank loans and overdrafts.
Businesses who are struggling to access traditional finance are increasingly turning to other business funding solutions in order to finance growth and boost their cash flow.
According to the Asset Based Finance Association (ABFA), businesses who employ invoice discounting and factoring receive tangible returns. Many have experienced rises in sales of up to 13% a year, with the total turnover for firms using invoice financing reaching £238bn in 2011.
In contrast to this, the Federation of Small Businesses has found the number of SMEs using bank finance has fallen in the past two years.
In a recent survey, the FSB found that only 35% had used a business overdraft in 2011, 11% had used a secured loan and 7% an unsecured loan – all of which had fallen significantly since 2009. Additionally, a third of business owners had used their own personal savings or inheritance to finance their company, a statistic that clearly shows the dearth of traditional funding options.
In order to stop this vicious cycle of bank lending refusals, businesses can turn to invoice finance and factoring to help ease cash flow issues. It’s possible to boost cash flow, and release funds from unpaid invoices – without having to worry about high interest rates or refused loans.