Firms turning to invoice factoring to fund growth

29/03/2012

New figures from the Asset Based Finance Association show that small businesses are increasingly using invoice factoring to fund growth.

It appears that the trend has emerged amongst firms as they find it increasingly difficult to access bank finance. The statistics show that invoice discounting and debt factoring have increased by around 13 per cent in the last year. According to the analysis, the total turnover for firms using invoice finance reached £238 billion in 2011.

Separate research from the Federation of Small Businesses found that the number of small businesses using bank loans and overdrafts has fallen over the past couple of years. The survey found that just 35 per cent of small businesses used an overdraft in 2011, whilst 11 per cent used a secured bank loan and seven per cent used an unsecured bank loan. These figures represent a drop of eight per cent, three per cent and four per cent respectively since 2009.

Paul Barnsley, chief operating officer for The Interface Financial Group (IFG), which offers invoice factoring, said, "Solutions like factoring and invoice discounting are essential to the regeneration and growth of the economy. As we see less availability of traditional overdrafts and loans, invoice finance is one of the few forms of funding available to firms."

He added, "It covers all sectors including construction, and although the market is a little more limited, there are some specialist firms that offer specific construction factoring. Many businesses depend on this type of finance to fund both ongoing trading and to finance growth."