SME Invoice Finance – why it’s popular, business case scenarios and more - Image

SME Invoice Finance – why it’s popular, business case scenarios and more

Our latest blog puts SME invoice finance in the spotlight, revealing why it’s one of the most popular cashflow support mechanisms available to developing UK businesses today. This blog provides an invaluable starting point for anyone wishing to explore their cashflow and growth opportunities.

What makes SME invoice finance so popular?

SME invoice finance is essentially identical to most of its invoice finance counterparts, with the only difference being that some products would not be suitable at the lower end of the turnover scale. Indeed, the process of accessing SME invoice finance runs in much the same way: upon raising an invoice to their customer(s), businesses notify their chosen funder with a copy of the outstanding invoice, after which the funder advances a high percentage of this invoice’s value to the business. From there the cashflow injection can be invested toward a venture of your desire, be it growth projects or operational improvements.

The latest “Invoice Finance and Asset Based Lending Update” from UK Finance indicates the continued market appeal that Invoice Finance holds for British businesses. The number of sales achieved by their clients utilising domestic factoring saw a year-on-year increase in June 2018 and export and import factoring sales growth was 13% for the same period.

Indeed, many firms seeking SME invoice finance flock towards factoring products in particular, since these arrangements are particularly attractive for those in a growth stage. Read below for more details on the advantageous characteristics which make the service particularly attractive to today’s small businesses…

  • Ease your credit collection woes – If the oft-costly task of chasing impending / unpaid customer payments is depriving your team of the time needed for other priority projects or growth initiatives, then factoring might represent the most suitable invoice finance products. Factoring funders will take this administrational responsibility off your hands from the get-go, collecting payments on your behalf and also transferring the remaining money owed – minus any fees – back to your firm once received.
  • Cash flow acceleration – You’ll quickly be able to access significant proportions of the invoices raised to customers, thereby enabling you to act or react to any critical business opportunities or requirements without endangering your working capital.
  • Rewarding your past business successes – So long as your firm can prove itself to have maintained a stable turnover of £50,000+ and reliable customer base in recent years, then you’ll likely encounter no trouble in securing an invoice finance arrangement. Why not capitalise on your hard-earned industry reputation and profit margins, using these selling points to catapult your business to the next level with vital advance funding?

Business case scenarios

Different businesses will approach their SME invoice finance arrangement with different goals depending on their current financial position and business strategy.  Below we’ve compiled three examples of the diverse ways in which factoring facilities can help businesses to grow and thrive…

  1. Construction Contracts and Finance Challenges – With Carillion’s downfall still casting an unmistakable shadow over UK construction nearly one year later, firms relatively new to the sector should take care in ensuring the long 90-120 payment terms do not create further challenges or negatively impact project completion. Invoice finance facilities can allow construction SMEs to access their owed funds within days rather than months and get everything in order such as labour and materials so that project milestones and deliverables are achieved.
  2. Market Changes and International Marketing – Another huge headline-grabbing concern has been the political and economic uncertainty tied with Brexit. Exports businesses embracing this change could use the cash unlocked from an invoice finance facility to launch a campaign to build awareness of their services or advertise to generate further business cross border. If certain workforce skills are required or there’s an impetus to bolster in-house capabilities, invoice finance for recruitment is also widely used.
  3. Information Technology and Intangible assets – Wholesale firms have vehicles, research firms have laboratories and instruments but for technology companies reliant on software, intellectual property and licenses, the lack of physical assets is not necessarily problematic if an invoice finance arrangement is being considered. Tech start-ups, web developers and software developers alike just need to ensure the creditworthiness of their customers is positive.

Find out more

The term ‘invoice finance’ encompasses a huge variety of cashflow support facilities, each serving a different purpose to businesses across all of the major sectors. Whether you’re looking to understand the basic processes involved with these arrangements, their unique strengths compared to other funding solutions or how it could address your specific challenges, our expert team of consultants are always happy to lend a hand with any outstanding queries here.

Be sure to visit our invoice factoring product page and broader ‘Why Use Business Finance?’ guide for further supportive information.

Apply now and one of our consultants will help to find you the best invoice finance facility for your business, free of charge.

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