A record £711m was lent to UK small businesses (with a turnover of less than £500,00) in invoice finance between January and March 2016. The figure, that represents an average £52,000 raised per business, highlights a 60% increase on the £485m raised in invoice finance by small enterprises in the first quarter of 2015.
The research that was carried out by the Asset Based Finance Association (ABFA) shows invoice to be a funding stream that’s growing in popularity for small business owners. It’s claimed by ABFA that around 80% of asset finance is made up by invoice finance which is used by businesses to unlock funds from raised invoices.
Jeff Longhurst, the ABFA chief executive, believes “invoice finance is now one of the primary ways that small businesses access funding”:
“We are seeing a growing appetite amongst small and medium enterprises to secure funding through this route with businesses securing ever increasing amounts.
“Since the credit crunch, accessing funding through traditional paths such as business loans has remained challenging for smaller businesses, and so the flexibility of finance options, competitive prices and the quick turnaround of decisions associated with invoice finance is a real draw for these businesses.”
Businesscomparison.com Channel Manager for Business Finance Laura Thomas says invoice finance can free up much needed cash,
“SMEs are owed nearly £500 billion in outstanding invoices and a third of businesses cite late payments as their biggest cause of cashflow problems so it’s unsurprising that many of them are turning to invoice finance. It’s a way for firms to free up cash to grow their business and take on new contracts and clients. The summer months can be a particularly tricky time for businesses to nail down payments as regular routines are often disrupted by holidays and bank holiday breaks so we may see the figures continue to rise for the next quarter.”