Life Beyond the Business Overdraft

Evette Orams, looks at tailored and fliexible funding solutionsWith so many businesses starved of traditional bank finance at present, Evette Orams, Managing Director of invoice finance broker Hilton-Baird Financial Solutions, explores the benefits that businesses could enjoy by looking beyond the likes of overdrafts and bank loans towards more flexible and tailored funding solutions.

Amongst the wide range of challenges that businesses have had to contend with in recent years, access to finance has featured highly on the lists of many.

Much has been made of the underwhelming bank lending statistics, so much so that the coalition government and the previous Labour administration have devoted much energy into improving them. Project Merlin, the Enterprise Finance Guarantee and the Funding for Lending Scheme are but three initiatives introduced at various intervals since the credit crunch took hold, each one designed to encourage the banks to increase their supply.

Their limited success has prompted many businesses to look beyond traditional funding routes. But rather than being greeted by equally stringent lending criteria and an exaggerated headache, many of those who are prepared to break away from the norm are instead realising that there’s much more to business finance than an overdraft or bank loan.

One particular success story has been that of asset based finance, an industry that has recorded impressive growth in recent years and continues to attract new companies. During the first quarter of 2013, more than 43,000 UK businesses of varying sizes were using the likes of factoring and invoice discounting to boost their cash flow. This figure, reported by the Asset Based Finance Association (ABFA), marks an annual increase of 2% and consists of more than 35,000 businesses that turn over less than £5 million.

Although this growth could be attributed to the growing number of businesses turning their attention away from their banks, the appeals of its product features cannot be ignored – particularly in the context of the wider economy.

For many, the cash flow complications caused by trading on credit terms have been restricting their ability to seize new opportunities, with capital locked up in the sales ledger. But asset based finance releases this cash as soon as an invoice is raised, providing the means to meet day-to-day operating costs, take on new orders and invest in growth.

Facilities therefore grow in line with the business as the more invoices it raises, the more funding it can access, and can truly facilitate growth. Indeed, sales of the ABFA’s members’ clients increased by 9% over the same period to £63.3 billion as a result of total advances growing by 6% to £16.3 billion.

To put this figure into context against traditional bank lending, figures from the British Bankers’ Association suggest that just £6 billion was provided to UK firms through loans and overdrafts during the first three months of the year.

The asset based finance sector is one of a number of industries that continue to provide financial support for businesses, however many companies appear reluctant to take a leap into what is widely perceived as the unknown. The familiarity of an overdraft or bank loan, together with the traditional mindset of talking to your bank manager whenever cash flow gets a bit tight, are common traits amongst SME owners. But sometimes it can prove far more productive and beneficial to consider the wider picture.

Evette Orams is the Managing Director of Hilton-Baird Financial Solutions, an independent invoice finance broker with expertise across the wider commercial finance market. For more information on how invoice finance could help your business, visit

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