invoice finance
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The surging popularity of invoice finance

With cash being crucial to business survival and growth, SMEs need to access cash through alternative funding solutions to continue to enable them to adapt, innovate and grow.

Invoice finance is one of the most effective ways for businesses to improve cash flow and sustain growth in today’s uncertain climate.

As SMEs face up to a deepening late payments crisis, invoice finance – borrowing against the value of unpaid invoices – has surged in popularity to provide crucial support in tough economic times.

By releasing up to 90% of the value of unpaid invoices, businesses can access additional working capital and use the funds to support day-to-day cashflow requirements or fuel future investment plans focusing on corporate social responsibility.

Invoice finance is not a new funding solution; it has been around for decades and has supported many thousands of businesses over the years, as it still does. By unlocking cash that could otherwise be trapped in unpaid invoices, invoice finance is a financial solution that can support the entire credit management process, protect against the risk of non-payment, and deliver funding when many other funding types are unable to.

In the UK, invoice finance has become an increasingly popular alternative to traditional financing options like bank loans and overdrafts, as it offers a more flexible and accessible solution for businesses in need of cash flow support and caters to a wide range of industries, including manufacturing, wholesale, construction, recruitment, and professional services.

Recent data from alternative finance provider Time Finance has shown the growing popularity of invoice finance amongst the B2B community, with demand predicted to rise throughout 2023 as SMEs set out to stabilise their finances.

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The new insight shows that invoice finance is ranked highest amongst alternative finance solutions, with 32% of financial intermediaries stating that invoice finance will be the most popular service to support cashflow this year.

Phil Chesham (pictured), Managing Director of Invoice Finance at Time Finance, commented: “We are seeing a real uplift in businesses that come to us for invoice finance, and this is definitely a trend we expect to see continue throughout 2023. At face value, this is an indicator of the cashflow challenges that businesses are experiencing, but looking at this more positively, we can take this as a sign that more businesses are discovering the real value of invoice finance.

“Invoice Finance is a helpful tool to manage cashflow and when harnessed as a part of a long-term financial strategy, it can ensure that a business has an uninterrupted supply of working capital in the bank. As a result, invoice finance enables businesses to inject their own money into their investment plans, whether that’s recruitment, skills development, equipment or marketing.”

Time Finance’s plans to double their invoice finances sales team in 2023, with the recent appointments of Thomas Ludden, Tariq Bourdouane, Neil Fullbrook and Casey Baldwin, shows the rising popularity of invoice finance witnessed by alternative finance providers.

There are a number of reasons for the rapid expansion of invoice finance in the UK, but a key driver is an increase in the number of late-paying companies. In their research, Time Finance found that B2B businesses are owed an average of £250,000 in unpaid invoices and some wait up to 120 days for payments to come through.

Access to liquidity is more critical than ever for SMEs who are the backbone of the UK economy, with many traditional financing providers increasingly rejecting applications for cash. Reducing the funding available to SME businesses during tough economic periods only hurts it more at a time when demand for liquidity needs to be expanded and not reduced.

Rising inflation and interest rates, along with increasing energy costs, are also challenging small businesses this year, with many facing closure. Providing SMEs with a path to secure lending will play an integral part in the economy’s resurgence.

Invoice finance provides SMEs with a variety of benefits including flexibility, faster turnaround, scalable funding, higher borrowing potential, and mitigating payment risks. Smaller independent funders also have more flexibility than traditional providers and can take advantage of value-creating opportunities.

By embracing alternative financing options such as invoice finance, SMEs can not only survive but also thrive in a post-pandemic world, despite the current economic challenges they face.

By Lisa Laverick

Source: Asset Finance International

sustainability
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89% of SME’s Would Check the Sustainability Credentials of a Supplier

The matter of how sustainable a potential supplier, stakeholder or partner is, is a priority for as many as nine in 10 small businesses, according to new research.

Polling a sample of more than 1,000 small business leaders, the results showed that 89% said they would check the sustainability credentials of a company in some way before deciding to work with them.

As sustainability issues become increasingly important, both the desire to work with green suppliers and scepticism of bold green claims are on the rise. Recent research found as many 76% small business said they intended to ‘green’ their supply chain last year, while the Competition and Markets Authority (CMA)* and Financial Conduct Authority (FCA)† have both introduced new measures to ensure green claims made by companies do not mislead.

58% would seek out official certifications, accreditation and listings

The results showed that almost half of small business leaders would actively check for an official certification that recognises the organisation as meeting certain sustainability standards. Additionally, around a third would check an organisation’s listing as a sustainable business on groups such as the Federation of Small Businesses or British Chambers of Commerce.

Interestingly, it was leaders of larger businesses (up to 250 employees) that were more likely to seek out official accreditation (64% vs 53% of businesses with fewer than 100 employees).

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Examining a company’s claims

A company’s own published materials were also a consideration highlighted by the survey. Around a third (34%) said they would research the company’s green policies and practices on its website, with an additional 31% saying they would check reports and mission statements that outline green objectives.

More directly, just over a quarter (28%) said they would ask representatives about the company’s attitude towards sustainability as part of the process to decide whether or not to work with them.

Broader reputation a significant factor

Around a third (35%) said that they would do a cursory search on the company both on the Internet and on social media to check what others had said about their sustainability credentials. Additionally, around one in five (22%) said they would ask close contacts of the company to get a sense of a partner’s reputation as a sustainable company.

Jo Morris, Head of Marketing and Insight at Novuna Business Finance commented:

“We are quickly reaching the point where many small businesses will seek out greener options if it falls within the bracket of what they consider to be affordable. This wave of interest is met with an ever increasing range of options to choose from. This means that business leaders are now forced to apply an additional layer of rigour to sort the genuine from the “too good to be true”. What we see from this research is not only the desire to work with green suppliers and stakeholders as part of their day-to-day operations, but also the extent to which they are prepared to check any claims.

“The new measures that are being introduced by the likes of the CMA and FCA will give small business leaders more confidence in the decisions that they make, however the importance of a business carrying out its own research cannot be overstated. Understanding the right questions to ask, and where to find this information, is a key part in the process to making good sustainable choices for a business.”

Source: Business News Wales

invoice finance
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Average SME plans to invest £321k to grow their business

New research from Aldermore’s SME Growth Index has revealed the investment and growth plans of small and medium-sized enterprises (SMEs) in the UK. Despite the ongoing cost-of-living crisis, SMEs plan to spend an average of £321K on growth strategies over the next year. One in eight (12%) SMEs plan to spend over £1 million investing in growth.

SMEs plan to grow online but curb talent spend

A third of businesses want to expand their customer base (33%) and grow their current products and services (29%) in 2023, while also reducing costs to combat the cost-of-living crisis (30%).

To reach their goals, business leaders plan to invest in their online presence. One in four SMEs (26%) will put money into improving or building websites and apps over the next year. This is in addition to investing in digital marketing (24%).

Interestingly, following the ‘Great Resignation’ fears that saw SME-leaders prioritise talent spend in 2022, talent acquisition and increases to employee salary and benefits are likely to see the least investment (17% each respectively) over the next year.

Business leaders continue to put hands in their own pockets to invest

SMEs will often turn to business savings (27%) or various forms of business finance (e.g., asset finance – 11%) to meet their goals. However, nearly two out of five SMEs (18%) will turn to their personal savings and over one in ten will use their own overdraft (12%) to meet business costs.

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Barriers to growth

Despite optimistic plans to invest heavily in the coming year, the biggest concerns SMEs are faced with are high energy costs (24%) and double-digit inflation rises (24%). This will represent the biggest barrier to business growth in 2023.

Those concerned about inflation costs estimate it could lead to delays in existing projects (19%), missed opportunities for growth (21%), and difficulties securing new deals (20%).

Tim Boag (pictured), group managing director of business finance at Aldermore said: “SMEs are the backbone of our business community and their ambitious growth plans over the next year bodes well for the economy, however they also face challenges brought about by high inflation and soaring energy costs.

“At Aldermore, we’ve supported SMEs through challenging times. It’s great to see from their plans that a digital presence for many has become a major priority, as consumer expectations have evolved post-pandemic.

“For business leaders, there are many sources of investment, be it utilising savings or accessing a range of specialist finance products; and at Aldermore we remain fully committed to backing businesses to realise their ambitions.”

By Lisa Laverick

Source: Asset Finance International

companies
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Survey: Two-thirds of British SMEs not confident on net-zero pathway

Only one-third of decision makers at UK-based small businesses say they are extremely confident about how to reach net-zero emissions.

That is a headline finding from BSI’s new net-zero barometer, which polled 1,000 senior decision-makers at small and medium-sized businesses (SMEs).

Awareness of the importance of transitioning to net-zero, the barometer survey found, is at al all-time high. 82% of those polled said it was important to set and achieve net-zero targets – triple the proportion who agreed in 2020. But the survey revealed an awareness-action gap.

BSI found that many SMEs have already tackled low-hanging fruit, such as reducing waste (44%) or fitting energy-efficient lighting (38%). Only 17% of those polled said they have not made any key changes to become more sustainable.

But the survey found that half of SMEs do not yet have a net-zero plan or policy. Moreover, only one-fifth of SMEs are measuring and reporting progress to cut emissions in a standard way. These findings suggest that many businesses are yet to embed the net-zero transition into their strategic planning, despite increasing pressure to do so from customers and investors.

BSI found that the biggest challenge preventing SMEs from developing and delivering a credible pathway to net-zero is the fact that they need to dedicate resources to respond to the cost-of-living crisis and energy price crisis.

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Facing these challenges – and other perceived barriers such as a lack of Government support and a desire not to be seen as greenwashing – only one-third of the SMEs polled would describe themselves as extremely confident in reaching net-zero.

“At a time where the attention of many SME leaders is being diverted by economic pressures, they want help to navigate a path that is both credible and realistic,” said BSI’s director-general of standards, Scott Steedman.

“SMEs want to understand both where they are on this journey, and what that transition means for them and their stakeholders. They can benefit from having a clear roadmap to how they’re going to achieve net zero, not only in their own operations, but also in their supply chains. Our research shows that with the right guidance – including the use of standards – SMEs are more than able to rise to this moment.”

Earlier this year, the SME Climate Hub posted similar findings from its own study of 350 businesses. That study found that seven in ten firms need more available funds to transition to net-zero, with most citing increased difficulty securing funds in the current economic climate.

By Sarah George

Source: edie.net