Amount of invoice finance received by UK small businesses up over 60% in a year

04 July 2016

  • Amount of finance advanced to smaller businesses reached a four year high of £711m

The amount of finance advanced to the UK’s smallest businesses* through invoice finance jumped by over 60% in the last year**, reaching £711m up from £435m the previous year, says the Asset Based Finance Association (ABFA), the body representing the invoice finance and asset based lending industry in the UK and the Republic of Ireland.

The ABFA says invoice finance, securing finance against unpaid invoices, is popular amongst businesses of all sizes, but is particularly widely used amongst SMEs.

The ABFA adds that the amount of finance advanced to the UK’s smaller businesses is the highest year on year boost since the recession, as businesses increasingly shift away from more ‘traditional’ types of finance and turn to invoice finance to help finance their business growth.

The ABFA adds that smaller businesses using invoice finance received an average of £52,000 in invoice finance in Q1 of 2016, up over 60% from an average of £32,000 in the same period the previous year, to help them grow and develop their businesses.

Jeff Longhurst, Chief Executive of the ABFA, says: “Invoice finance is now one of the primary ways that small businesses access funding.”

“We are seeing a growing appetite amongst SMEs to secure funding through this route with businesses securing ever increasing amounts.”

“Since the credit crunch accessing funding through traditional paths such as business loans has remained challenging for smaller businesses, and so the flexibility of finance options, competitive prices and the quick turnaround of decisions associated with invoice finance is a real draw for these businesses.”

“Whether small businesses need capital for growth plans, to expand order books or to boost cashflow in order to help manage the risk of bad debts – borrowing against unpaid invoices can be an effective means to achieve these goals.”

The ABFA adds that the total amount advanced to UK and Irish businesses through asset based finance (invoice finance and asset based lending) at the close of 2015 was £19.3bn, up from £18.9bn the previous year.

The ABFA explains that around 80 per cent of asset based finance is invoice finance, while the other 20 per cent represents the fast-growing area of asset based lending, in which in addition to debts, businesses can raise funding secured against a range of other assets they own, including inventory, property, and machinery.

However, the ABFA explains that although businesses are increasingly using asset based finance, there still remain some businesses that are unaware of the full range of finance options available to them.

The ABFA adds that the new Business Finance Guide- a journey from start-up to growth launched in June by the British Business Bank and the ICAEW Corporate Finance Faculty, in association with the ABFA and partners across the business finance industry, will help address this information gap.

The new Business Finance Guide is in hard copy, but also has an interactive website platform aimed to improve usability for UK businesses, making it easier for businesses to identify the funding solutions most appropriate to them: www.thebusinessfinanceguide.co.uk/abfa.

Jeff Longhurst continues: “It’s important that businesses of all sizes are aware of the many options available to them when looking for funding and the new edition of the Business Finance Guide will be a significant tool in ensuring that this is the case.”

Amount of invoice finance advanced to small businesses rises by over 60% in a year

Funds advanced to SME's Q1 2016

*Businesses with an annual turnover of under £500,000

**Q1 2016 compared to Q1 2015

To access ABFA Statistics, please click here.

Return to news index