Monday 29th Oct 2018
Why don’t more SME’s use invoice finance?
05 Apr 2011
Only around 41,500 companies use invoice finance, yet 38% of SMEs say they have cash-flow issues, almost 800,000 companies! So invoice finance only has a usage rate of 2% as a whole and only 5% of the companies that could benefit actually use this service (sure some of them will be B2C business and not suitable for factoring, but even if its half, there is still a massive opportunity). There is a lot of scope for invoice finance companies to explain the benefits of factoring and invoice discounting.
It could be perfect…
Invoice finance (either factoring or invoice discounting) could be the perfect solution. You only pay interest on the money you borrow and the flexibility is perfect for growing companies. The costs compared to asset finance and even overdrafts can be surprisingly competitive. Some people think there is a stigma with invoice factoring – I’m not sure this is true, ABFA and a leading intermediary research company show that the companies using Invoice finance are growing quicker than similar companies that don’t. There was a great article in the Financial Times a couple of weeks ago explaining how companies could use invoice finance and factoring to grow their business.
What needs to change?
We, as an industry, just need to get our message across about the benefits and costs of invoice finance to good, strong companies that need cash-flow support to help them grow. If we targeted non users that are in a strong position but need a helping hand – we would help create a move in people’s perception. At the same time the industry should look to innovate on pricing, services and product development. I know this is our aim at Hitachi Capital, to launch two new products this year to help stimulate new demand into the market.
Please let me know your thoughts either directly or through the blog.