Every small business in the country will have experienced late payments at one time or another. Fortunately, the issue is often short lived with customers paying up after a gentle prompt, however sometimes customers operate to different payment terms or may delay payment due to their own business issues which can have a negative impact on the cash-flow of the supplying business.
Any delays to payment can be hugely frustrating and have a negative impact on a business. In the past, businesses may have approached their bank to extend their credit facilities or for a loan, however today more companies are turning to alterative lenders who are able to offer a broader range of funding options, with flexible and bespoke solutions to their individual needs exemplified by the Invoice Discount or Factoring facility.
Statistics from the Asset Based Finance Association suggest that alternative lenders are providing more funding to SMEs than ever before. In the first quarter of this year alone, SMEs raised £711m from the sector according to the ABFA, a 60% increase on the same period of 2015. The sector’s total lending to SMEs now stands at £19.3bn.
The increasing use of other types of business finance reflects a heightened awareness amongst SMEs that they do have funding options other than what’s available from the banks, with research suggesting that more than 75% of SME CEOs are now aware of options beyond traditional banking.
Industry data suggests that this is feeding through into take-up, for example, 12% of SMEs are already using invoice finance, while a further 46% say they would consider doing so if and when they need to raise finance.
The reasons that invoice financing are proving to be so popular is the speed in which they can achieve access to funds as well as the cheaper cost of funding and its simplicity. Additionally, the stress and time consuming nature of chasing payments from your debtors is taken over by the Invoice Finance provider, either on your behalf, or confidentially.
In fact, in most cases, PFC’s client that have taken up Invoice Finance facilities, often see a significant increase in turnover and profitability as they are given the chance to concentrate on growing the business and not chasing payments or dealing with extended payment days.
For these and other reasons, the Federation of Small Business and the British Chambers of Commerce have been keen to promote the option as one of the diverse range of financing options.
With uncertain times ahead and much change forecast for the economy, having access to alternative forms of finance can be the lifeline for many small businesses. With access to finance and the rise of alternative finance options, let’s hope the frustrations of a small business owner are short-lived.
If you’re looking for access to finance, contact the team and let us discuss the options available to you.