Two recent studies hint at the fact that the benefits of invoice finance are as important as ever but perhaps still not fully understood by a number of SME’s.
Traditional bank overdraft lending is shrinking! Apologies for stating the obvious but at least it’s good to have some figures attached to the well-known fact that the old guard continue to retreat at pace from supporting SME’s.
Some recent crunching of Bank of England figures shows that over the last two years the reduction or complete removal of these facilities has been experienced by some 30% of small businesses. To put some more meat on the bones these figures also highlight that since 2011 the total stock of SME overdrafts has fallen by £5 million per day.
It gets personal
So, just what has been replacing this crucial day-to-day funding for the sector seen by many as the one to drag the UK economy back to full health? Well, according to research by a well-known Spanish name in the high street, 13% of SME owners have been relying on their personal flexible friend or a personal loan/overdraft to stand by them in their hour of need.
Unfortunately this hour of need tends to extend to the week, month and finally year of need in many cases and stretching personal finances over this period to prop up a business is a double edged sword that for many is probably unnecessary.
Same old hymn sheet
The study also revealed that 43% of them are worried about cash flow over the next 12 months with a quarter citing slow customer payments and bad debts as the main problem.
Sir Martin Sorrell probably couldn’t conjure up a better set of reasons to wave the flag for invoice finance. All of these findings form the perfect pitch for an alternative finance product that can now be used on a medium to long term basis or as a one off solution to a pressing cash flow issue.
Let it wash its own face
The assets of a business should be the first port of call when seeking to generate cash and invoices are just that (and liquid ones to boot). Innovation within the invoice finance industry has also widened the field so that businesses with differing requirements in terms of contract length and fee structure can enjoy the benefits too.
If that wasn’t enough, the late payment and bad debt worries of a quarter of those SME’s mentioned above can be alleviated with products such as credit management and bad debt protection.
Immediate cash, debt collection and customer default cover; the message is clear but in some cases clearly not loud enough!