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Failing to take advantage.

There are two sides to this story, on one side the amount of SME’s in the UK taking advantage of funding from Factoring and invoice discounting has risen over the past 5 financial quarters.

The other side paints a bit of a bleak picture where not enough companies are taking advantage of a lending processes which is incredibly simple and quick to gain funds.

From a report carried out by Centric Commercial Finance states there are 650, 000 companies in the UK that are eligible for Asset Based Funding. If these companies start to use the system of gaining funds against the capital held in invoices, this could improve the country’s Gross Domestic Product by the end of 2012. Which is good news all round.

In fact the amount of companies using Factoring or Invoice discounting is tiny in comparison, at on 41,000.

Since the beginning of the financial crisis, banks have withdrawn lending leaving SME’s in a predicament. Some have used profit to continue rolling business out, some have tried to re mortgage houses and use personal savings, those savvy companies have turned to Factoring as a means to raise capital quickly.

The amount of money used through Factoring has doubled since 2000, and in the last 5 years funding through invoices has risen to £15.8 billion which is an increase of 22.2%

So do the other 650,000 know about factoring? Are they curious? Or are they financially stable and don’t need any funding.

The money raised from using capital from invoices allows growth within smaller companies. It can help purchase vehicles and machinery, it can pay staff salaries, it can be used to pay tax and supplier bill. How companies use the money is ultimately up to them, but the fact its, factoring is growing, and is possibly the quickest, simplest, sensible way of raising funds for a company.

 

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