Invoice finance reaches record levels

The UK’s small businesses have secured more than £20 billion through invoice finance in the last year, rising by £1 billion from 12 months ago.

Lending was up 5% from £19.3 billion a year ago to £20.3 billion this, while asset-based lending and invoice finance has risen by 27% in five years.

The figures come from the Asset Based Finance Association (ABFA) which represents the Invoice Finance and Asset Based Lending Industry in the UK and Ireland.

Reaching a record high, the figures are driven by an 18% rise in the amount drawn down by the UK’s biggest firms with a turnover of £100 million or greater.

The credit crunch saw many UK firms face delays with invoice payments from customers – invoice finance was viewed as a way of reaching tied-up capital to fund growth.

Now the ABFA has suggested that businesses are trying to build their cash surplus instead of paying suppliers, which may cause further payment problems.

Around 80% of asset-based finance is currently invoice finance, according to the ABFA, with the further 20% coming from asset-based lending.

The latter allows businesses to secure funding against a range of their assets, from machinery and property to their inventory, in addition to any debt they may have.

ABFA Chief Executive Jeff Longhurst adds that it is viewed as a key source of finance for growth, as well as merger and acquisition deals.

He describes both invoice finance and asset-based lending as “established” parts of the commercial finance market, with a growing number of firms now exploring alternative finance options, especially in the face of financial issues.

The asset-based finance market grew steadily after the financial crisis, providing firms with a means of driving growth and giving a level of protection from bad debts.

By Phil Smith

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