When compared to other countries, business finance in the UK is very reliant on the banking sector. Whereas in the US the banks only supply around 20% of credit, in the UK the figure is closer to 80%. However, now the banks are unwilling to lend due to ongoing economic strife, where can UK businesses get that all important funding from?
Turn to alternative finance
Methods of business finance such as invoice discounting are becoming a larger part of the UK lending landscape. Invoice discounting is a form of short term borrowing which lets businesses release cash flow tied up within unpaid customer invoices. This allows companies to get access to funds which might otherwise be unavailable for weeks or months.
One of the big benefits of invoice finance is that it can help alleviate cash flow problems which are often common for small businesses. In a supply chain, small businesses will be further down the pecking order and so will often be kept waiting for payment, as they will not have the leverage to force larger companies into paying up. Small businesses themselves have bills to pay and will need to keep their own suppliers happy – this is where invoice finance comes in.
Invoice finance lets small businesses bridge the gap between issuing invoices and receiving payment. It is one way to get cash flow running properly without having to take out high interest loans or overdrafts, which the banks might not be willing to grant anyway.
Invoice finance is one way that small businesses can bypass the banks to access flexible funding that can really help to get cash flow flowing.