How to improve Cashflow using Invoice Finance

We look at the rise of invoice finance and why it could be the answer to your small business' cashflow woes

How to improve Cashflow using Invoice Finance

For small businesses to succeed in an unpredictable financial climate they need the right tools at their disposal, with one of the biggest problems being access to sufficient cash flow. For a number of businesses, invoice finance is providing an attractive option.

Currently in the UK there are more than five million small businesses operating across a variety of sectors. With more and more businesses being created each and every year (the figures have increased by just short of a million since 2008) the right support structure must be in place to assist them to deal with their day to day issues, as well as enabling them to think about the bigger picture of expansion and growth.

Small business support

One of the biggest issues faced by small and medium enterprises – which unites those operating in different markets – is the problem faced with cash flow. Whether this is securing external finance to start-up or accessing cash which is tied up in existing assets (such as invoices), it’s a huge problem affecting many small businesses.

Support structures such as Funding for Lending have been put in place by the Coalition Government, with significant policies announced earlier this year in the Budget. However, for many small and medium enterprises there is the feeling that it isn’t quite enough. Following a survey conducted by Bibby Financial Services, in the aftermath of the budget announcement:

  • 50% felt that it had not done enough to promote growth in the next year
  • 24% felt that more business support was needed in the first half of 2013 as opposed to schemes which may benefit towards the back end of 2014
  • 34% felt the required support must be financial

The small business community

The feelings of a significant proportion of small and medium enterprises can be summed up by Angela Goudry, Owner of Chillfast Couriers, who said:

“We hear a lot of reports in the media about funding being made available for small businesses, such as the Funding for Lending scheme, but it doesn’t seem to be making its way from the banks to the businesses that need it most.”

“Small businesses need to look elsewhere for funding support to help them grow, such as invoice finance, which is available and offers support and flexibility.”

The rise of invoice finance

Many small businesses have turned their backs on attempting to secure finance through traditional forms of lending and are opting for alternative forms, such as invoice finance.

In fact, invoice finance provider Bibby Financial Services showed a funding increase of 18% being made available to new customers between Q4 2012 and Q1 2013. With £61,497,030 made available purely for new clients from just the one invoice finance provider, it’s clear to see that the market for these products is booming amidst the loss of confidence many small businesses are clearly feeling.

Is invoice finance the answer? Many small businesses are clearly leaning towards it as a viable solution. Whether this continues to hamper the Government’s continued plans to promote small business finance is a question which will become apparent as we enter 2014.

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