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Invoice Factoring Fills Lending Gap

Invoice factoring firms are becoming more and more important to the small business community, especially with the banks falling short on lending requirements. Despite ongoing government schemes to get the banks lending, alternative finance is looking to fill the gap in the mean time, and services such as factoring and invoice discounting are becoming increasingly mainstream.

Invoice finance specialists are experiencing a rise in demand for their services in the light of many banks looking to reduce lending to ‘risky’ small businesses. The Asset Based Finance Association (ABFA) has released figures that show the turnover of the 41,989 companies using invoice finance in the UK has increased by 6% in the first quarter of 2012.

There has also been an increase in the invoice finance awarded to small businesses – funding by the ABFA’s members has risen 4% over the past year to a high of £15.4billion by March this year. This growth shows that more businesses are turning away from the banks for their funding needs – whereas invoice finance in the past may not have had a high profile, it is now becoming more well known as traditional forms of lending are becoming inaccessible.

The availability of invoice finance is crucial in helping many small businesses cope with the on going economic stresses. While it might be hard to access bank finance, factoring or invoice discounting could help SMEs capitalise on growth opportunities which they may have missed otherwise due to lack of cash flow.

Invoice factoring can release the cash tied up in unpaid invoices – by selling invoices to a factoring lender, you can release up to 90% of their value within 24 hours, with the remaining 10% released once the customer has paid. There’s no new debt to be taken on, and small businesses can benefit from an entire credit control system operated by the factoring lender.

Though the banks might not be lending there are still plenty of options out there for SMEs – invoice finance could help your business.

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