Factoring seen as solid option for small businesses

13/09/2012

Factoring has been named as an ‘extremely appropriate’ and ‘robust’ funding option for small businesses.

According to accountant Emmanuel Ikhazobor, who spoke at BusinessDay’s organised Annual Capital Market Conference, factoring would allow small and medium-sized enterprises (SMEs) to access good governance, which is ‘currently absent in the sub-sector.’

SMEs who are currently turning away from traditional high-street bank lending due to the rising interest rates attached to such loans should consider factoring as an alternative, Ikhazobor recommended.

Another funding expert, Sudeb Sarbadhikary, who is the CEO of India Factoring, told Business Day, “Banks want more collateral against loans. Factoring companies are relatively flexible."

Mr Sarbadhikary went on to say, "If we are satisfied with the quality of the debtors, we then are not hooked into collateral. In the last few years, we have seen SMEs are getting starved of traditional liquidity. In the recent time, a lot of new clients are approaching us. We can extend the list of funding options for SMEs by turning the factoring business up to full blast. It is highly desired."

Indeed, recent figures from the Asset Based Lending Association showed a nine per cent growth in the practice of lending against assets - which is often called invoice factoring - during the first quarter of 2011. This took the total lending to £12.4 billion.