New figures from the Asset Based Finance Association (ABFA) have revealed that UK businesses have raised £20.3 billion in invoice financing in 2016, breaking the record for this line of funding.
This marks a 5% rise from the previous record of £19.3 billion which was measured during 2015.
If we go further back, we can see just how much SMEs have increasingly come to rely on invoice financing – the 2016 figures show a rise of over a quarter (27%) so far when compared to the £16 billion measured during the whole of the 2011-12 financial year.
Much of this rise is accountable to an 18% increase in the amount drawn down by the largest UK businesses (i.e. businesses with a turnover above £100 million), which is up from £5.8 billion in funding last year to £6.9 billion in 2016.
The ABFA report notes that currently invoice financing accounts for about 80% of all asset-based finance, with the remaining 20% falling to asset-based lending.
Interestingly, the number of businesses that use invoice financing is rising at a slower pace than the amount being borrowed, with the total number increasing just 1% over the past year, up from 43,133 to 43,913.
Invoice financing remains one of the key cash flow methods that SMEs turn to in order to plug the gap left wide by the culture of late payments, which has been an increasing problem particularly in the wake of the 2007-09 financial disaster.
Jeff Longhurst, chief executive for ABFA, comments that invoice financing remains as one of the most important sources of working capital for SMEs in 2016:
“Invoice Finance and asset-based lending are now an established part of the commercial finance market and there is increased appetite from larger UK businesses to secure funding through this route.
“While the availability of finance from traditional sources was relatively slow to recover from the credit crunch, the asset-based finance market opened its doors to businesses and there remains significant capacity to provide more finance to more UK businesses.”
Tags: alternative business finance, alternative business lending, alternative finance, alternative funding, alternative lenders, alternative lending, altfi, asset-based finance, asset-based lending, Invoice finance, invoice financing, SME, SME lending, SMEs