Invoice financing proving popular among small businesses

The total amount of invoice financing lent to UK businesses hit the £20 billion point for the first time, rising from the £19.3 billion measured during last year.

This is a substantial increase on figures taken from the last five years – a rise of over a quarter (27 per cent) so far, when compared to the £16 billion measured during the 2011-2012 financial year.  The figures have been taken from the Asset Based Finance Association (ABFA), the body responsible for representing the Invoice Finance and Asset Based Lending Industry in Britain.

A substantial part of the lending increase came from the UK’s largest businesses, classed in this case as businesses with a turnover above £100 million.  These companies were responsible for 18 per cent of the increase, with lending reaching £6.9 billion, compared to £5.8 million last year.

With many smaller businesses suffering delays on payment of their invoices in the wake of the credit crunch, invoice financing has helped to plug the gap, enabling businesses to unlock tied-up capital and fund their growth.

The ABFA estimates that about 80 per cent of all asset-based finance at the moment is invoice, with the other 20 per cent asset-based lending.  This involves businesses raising funding secured against other assets they may own such as inventory or property.

Jeff Longhurst, chief executive for the ABFA, noted that invoice financing remains one of the most important sources of working capital for small businesses looking to expand and grow.

“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.”

Date published 7 Sep 2016 | Last updated 7 Sep 2016