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More Businesses to Seek Invoice Finance

Invoice finance is one of the fast growing ways to enhance your business cash flow and to give more flexibility to a huge range of SME funding predicaments. But why don’t more businesses use it? It’s not a new idea and has in fact been around for decades, and its reputation is growing with government endorsement. However, its still under represented amongst the mainstream of small businesses, despite the many advantages attached to using it – but why?

New research has uncovered the reasons that invoice finance is still only emerging as a well known business finance solution. So what were the biggest obstacles for businesses not using invoice discounting and factoring?

31 % believed that invoice finance had not been promoted enough. This is understandable given that in the UK, the big banks hold a near monopoly on business lending. However, with recent economic circumstances, it is becoming more necessary to look outside the most obvious options. With the internet now a vital part of many finance portals, it’s becoming more possible to access lending from a variety of sources. So, businesses need to do a bit more research in order to find the best option for them, but equally independent lenders need to get the word out!

18% believed it was easier to use bank loans and overdrafts. However, this is perhaps based on a lack of knowledge about the invoice finance options available. In fact, some factoring services such as invoice discounting require minimal work from the client once set up. There are more advantages; invoice finance can grow in line with your business turnover unlike loans and overdrafts, you’re likely to be able to access more funds from invoice finance, and invoice finance is far more accessible to even struggling businesses of negative net worth.

41% believed that cost was a big factor – however, factoring can be used in such a way to offset any fees incurred and on the whole represent a good level of saving. Savings are also made through the outsourcing of the credit control function, which is often very valuable for small businesses. Invoice factoring also means you aren’t taking on new debt at high interest levels, so there’s another benefit to seeking finance outside the traditional channels.

Invoice finance is growing in reputation, and it is likely to become a mainstay of SME financing over the next few years, especially in light of the banks being unable to fullfil their role as the primary means of business finance.

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