The week completed, 20th November 2015

blog

There was an interesting advertisement in last Sunday’s Telegraph, (albeit tucked away in an independently produced supplement) placed by The Asset Based Finance Association (ABFA), the organisation of which the vast majority of Factoring and Invoice discounting providers are members.

The advertisement stated that clients of ABFA members,( i.e businesses that use some kind of invoice finance) saw their sales rise by 7% during 2014, concluding that these businesses outperformed the UK economy as a whole using the Gross Domestic Product (GDP) growth in 2014 of 2.6%

Invoice finance, in whichever format it takes, can be a fantastic benefit to a business bringing a real, measurable, competitive advantage as the statistic above demonstrates. Businesses using some kind of invoice finance will usually have access to more working capital with professional supporting systems and credit insurance included, if needed.

The flexibility of the services offered gives users far more ability to adapt quicker than a conventional overdraft facility and enhanced funding levels allow opportunities, that may otherwise be missed through lack of quick cash, to be taken.

With all the benefits in mind and the compelling statistic from ABFA its disappointing that overall client numbers are not increasing in a material way. At the end of June 2015 there were 43,921 clients using the services of ABFA members. As the credit crunch was starting in earnest ABFA reported client numbers of 48,782 in December 2007.

Whilst the current number reflects the damage done to SME’s between 2007 and now its odd that numbers remain so static.

In no small measure this is attributable to the lack of visibility invoice finance products have and newer funding facilities such as internet auction platforms and the many, many crowd funding sources, appear, anecdotally, to have far stronger marketing skills and thus greater visibility.

As and when interest rates go up so the peer to peer funders/crowd lenders may move their money back to conventional return investments and the vulnerability to which some of the single invoice auction platforms subject themselves may also have a bearing on their long term future.

Consequently it’s important that bodies such as ABFA and their members do more to market a range of invoice finance products proven to work and offering long term solutions to businesses. Simply moving clients around from one financier to another is not sustainable.