Recent figures in the Asset Based Finance Association are convinced that as at September 2009, just 42,983 United kingdom companies use invoice finance provided via their membership. This represents just .73% from the final amount of United kingdom companies presently indexed by Dun & Bradstreet’s Marketplace of United kingdom Companies Database.
To be able to find and try the causes of this low occupy of invoice financing, we commissioned a bit of research that involved telephone interviews with 100 SMEs (Small & Medium-sized Companies) to higher understand their attitudes to invoice finance.
We requested individuals companies:
“Why do you consider that so couple of companies within the United kingdom use invoice finance?”
The outcomes were the following:
41% stated because of cost.
31% stated that it hadn’t been promoted enough and companies had not heard about it.
18% stated it had been simpler to make use of overdrafts or loans.
10% stated it had been because of the bad status they connected with while using products.
Individuals are interesting solutions because they demonstrate how poorly promoted these items happen to be, and just how prevalent misunderstandings about these items are.
Analysis of Individuals Results
Taking each response so as, there are several tips that companies appear to possess misinterpreted.
41% – Cost
We lately built and printed a factoring savings calculator that shown the way a business can use factoring (a kind of invoice finance) and get savings that will greater than offset any charges incurred and may produce a internet cost reduction towards the business. These savings are created possible through while using outsourced credit control function that is included with factoring by seeking supplier reduced prices for cash payments thanks to the money released from factoring.
31% Not Promoted Enough / Had not Heard About It
This insufficient promotion of those flexible capital products, through the invoice finance industry, is clearly something which is adding towards the low occupy of those products and the possible lack of understanding about how exactly these facilities work.
18% Simpler To Make Use Of Overdraft Or Loans
There are many facts to consider here.
First of all, the quantity of work needed of the client to operate some invoice finance facilities is completely minimal. You will find products available on the market which have eradicated the requirement for reconciliations and technological developments imply that invoices can frequently by submitted digitally, and instantly, right out the client’s sales ledger package. The customer may even decide to have cash used in their account because it opens up so that they don’t even need to request it.
Even when we assumed that overdrafts were simpler to make use of, there are a variety of benefits of invoice finance over overdrafts and loans:
* Overdrafts and financing does not grow consistent with development in business turnover whereas invoice finance does.
* The amount of funding released by invoice finance will probably exceed so what can be elevated through overdrafts and loans.
* Overdrafts and loans frequently need a internet worth in the industry along with a lucrative buying and selling history whereas invoice finance could be open to loss making companies even thought there is a negative internet worth.
10% Bad Status
A small amount of respondents felt that using invoice finance might be harmful to their status if other companies understood about this. I’d argue it may be great for their status, his or her income will improve, but taking their concerns aboard you will find facilities available which are totally private. The client’s customers won’t be aware that they’re utilizing it which overcomes any concerns they’ve already.
So in conclusion, there seems to possess been little promotion of invoice finance within the United kingdom and therefore little understanding of invoice finance is apparent among United kingdom companies. This along with a lot of misunderstanding concerning the facilities that are offered underneath the banner of invoice finance is most likely what’s presently resulting in the low-level of occupy of those flexible types of capital finance.