New research from the Asset Based Finance Association (ABFA) has revealed a huge spike in the amount of money advanced to UK SMEs through invoice financing.
Overall lending reached £711 million in Q1 2016, representing a 63% rise from the £435 million lent in the same period in 2015. The average amount lent to small businesses through invoice finance at the start of year stood at £52,000, compared to £32,000 in 2015.
Jeff Longhurst, ABFA chief executive, said that “small businesses borrow against unpaid invoices for growth plans, to expand order books and to boost cash flow in order to help manage the risk of bad debts.
“Such financing has risen in the face of the reluctance of conventional lenders to lend money to small firms. Following the Brexit vote, it has also proved an attractive way to hedge against currency fluctuations.”
“A lot of people are asking how we feel the markets are likely to move because they are now looking to react to the market volatility around exchange rates and uncertainty around international markets.”
Invoice finance is becoming a very popular funding solution for businesses of all sizes. Bridging the gap between the point a sale is made and the time payment is received is becoming more and more important, as the UK’s late payments culture continues to put pressure on small businesses in particular.
The rise in figures for the start of the year indeed indicate just how crucial this avenue has become, at a time when small firms are increasingly having to turn to the courts to chase late payments, with the average amount being pursued standing at £4,619.
“Almost £5,000 is a significant amount for any small business to have to go to court to chase and it is hugely unfair that a small business should have to spend its precious time and resources on chasing payment for work that has already been delivered,” said Martin Campbell of Ormsby Street.
“Late invoice payment is fast becoming the scourge of small business in the UK, causing cash-flow issues that can impact growth and even the very existence of a business,” he added.
Invoice finance, it seems, is becoming a progressively more popular solution to this ongoing problem.
Tags: alternative business finance, alternative business lending, alternative finance, alternative funding, alternative lenders, alternative lending, altfi, Invoice finance, invoice financing, SME lending, SMEs