Factoring firms step in to fill lending gaps

06/11/2012

Short-term lenders and invoice factoring firms are increasingly stepping in to fill the gaps left as banks continue their reluctance to lend, according to a report in the Liverpool Daily Post.

Several lenders have increased the amount they will lend out in a factoring arrangement with businesses who are struggling with cash flow during these tough times. The Asset Based Finance Association (ABFA) has revealed that there has been a 6 per cent increase in the number of businesses using invoice factoring services during the first quarter of 2012.

In addition, funding lend out by ABFA members in the past year had increased by 4 per cent to a total of 15.4 billion. One lender, Bibby Financial Services, was asked why business is booming. Its sales manager, Stephen Johnson explained, “We will also do single debtor finance. We also do a lot with international debtors arising from export sales. Banks are reluctant to cover 100 per cent of invoices from America. They worry about getting their money back from other countries.

“We make sure the goods or services have been delivered and then we will fund the invoice.”

Invoice factoring involves a business ‘selling’ an unpaid invoice to a factoring firm, who will then pay them the value of the invoice minus a small fee. They then chase up the invoice themselves, leaving the business with a better cash flow and less work to do in chasing invoices.