Factoring and invoice discounting are becoming increasingly common methods of finance for small businesses, and it isn’t hard to see why. Being able to release funds tied up in invoices can be a great way to keep cash flow steady without needing to wait to be paid by unreliable clients, and it can be a great alternative to more traditional forms of finance such as loans and overdrafts.
These forms of finance can be especially useful at this time of year when budgets can be tight for everyone, allowing businesses to start the new year without needing to worry about negative cash flow, and they’ve continued to rise in popularity throughout the past 12 months. Here are just a few statistics to get you started (coming from the Asset Based Finance Association/ABFA):
- The number of companies using invoice factoring and discounting increased to just under 43,000 in the first half of 2012
- Around 75% of those companies chose to go down the invoice discounting route with a smaller percentage choosing factoring
- Funding by AFBA’s members increased by 3% up to September 2012 with £16.5bn advanced
These statistics just show the huge market for invoice financing and discounting, not to mention how much businesses have come to rely on it. More companies are choosing to go down this route all the time with more funding being made available accordingly, and of course, we’ve still got the final quarter’s statistics for 2012 to analyse.
Arguably, the rise in invoice discounting and factoring is in response to it becoming harder for small businesses to access loans and overdrafts from traditional lenders. These alternative methods can offer a valuable cash injection to ensure things can continue to run smoothly, and it’ll be interesting to see how many more companies decide to opt for this method of finance in 2013…