Government considers proving factoring services

29/01/2009

The government is said to be in informal discussions with the Asset Based Finance Association over the possibility that it may begin to provide firms with invoice discounting in order to boost cash flow among smaller firms.

Factoring is seen as an essential part of business for many smaller firms who are finding that fewer option are available to them as a result of the contraction of the credit marketplace. Factoring is also being seen as an alternative to credit insurance, which is becoming scarce in response to increasing company failures.

The demand for invoice discounting remains high, with asset based lending (including factoring) rising 15% in the four months to September 2008.

The government is concerned about the lack of credit available to small and medium sized enterprises (SMEs) and the provision of factoring is one of the solutions it is considering.

It seems it may look at the possibility of providing guarantees or finance to larger banks that usually provide factoring, in an attempt to encourage them to continue to do so. The government is also expecting demand to grow over coming months and is aware that supply may not meet demand without intervention.