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Growth in Invoice Finance

Invoice finance is growing in popularity across sectors from start ups to businesses turning over £100m a year. This is a trend that’s being encouraged by the government, and with good reason.

Small, Medium and Large Businesses

Small businesses beset by late payment issues have been taking advantage of this form of finance. When waiting an average of fifty days for payment, many are finding it hard to pay bills, staff and taxes on time – despite the fact they’ve got healthy order books.

Invoice finance allows businesses to unlock the capital that’s tied up in invoices. One such small business, AS Fabrications, turned to invoice finance; the managing director commented, “We get the cash in seven days and that makes a massive difference to cash flow.” Factoring lenders will charge a small fee, but this is tiny incomparison to the benefit of having improved cash flow, which is the life blood of any SME

There’s also been a shift to larger companies using invoice discounting, a type of invoice finance which allows companies to remain in control of credit collection. The number of companies using invoice discounting with £100m+ turnovers rose by almost a quarter in the final three months of 2011.

Government Backing 

The government has backed factoring, invoice discounting and invoice finance as a way to re-invigorate UK economic growth. The Department for Business, Innovation and Skills has announced government plans for a £100m fund for alternative financing in order to boost the capabilities of the sector to give any size business the funding it needs.

This is all echoed by the big banks, who are themselves starting to move toward alternative finance solutions. Lenders such as Barclays are starting to offer more flexible funding that is better at providing for the needs of businesses than traditional bank loans and overdrafts.

This all points to a change in the lending landscape for SMEs, which will hopefully make it easier to get hold of the funding that’s so essential.



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