Businesses experiencing problems with their cash flow may first think of turning to the banks for funding, but with increasingly stringent lending criteria, this isn’t always a viable option. With late payments from customers causing real problems for many businesses, some are looking elsewhere for help. Figures from invoice finance lenders have shown that more and more are turning to factoring and invoice discounting, showing the increasingly popular nature of this method of asset based finance.
Some invoice finance firms have experienced a boost to their business like never before, with 50% growth in deals over the first six months of 2012. Experts are putting this rise down to the growing recognition of invoice finance as one of the key ways for SMEs to combat cash flow and late payment problems. Couple this with the increasingly stringent nature of bank lending conditions, and many businesses are clearly taking advantage of invoice finance as one of the most suitable options for their needs.
While invoice finance has been around for a long time, it’s only in the last few years that it has started to gain credibility as a good way for SMEs to address funding problems. Combining increased availability from both independent lenders and banks with a need for finance amongst SMEs means that it is coming more to the fore of business finance options. The government has also backed invoice finance as one of the key ways to plug the multi million pound funding gap created by the banks, and as such factoring and invoice discounting are becoming more well known.
Though invoice finance may before have been seen as almost a last resort, now that is not the case. Businesses with healthy sales ledgers are using factoring to get hold of funds for growth. In fact, the Asset Based Finance Association released figures earlier this year that showed businesses using invoice finance in 2011 enjoyed, on average, a 13% increase in their sales – something any SME would want to take advantage of.