Glenn Blackman of Cashflow Acceleration Limited explores the potential market growth of the UK invoice finance industry.

Last month I set out the secret to selling more invoice finance, by giving customers what they say they want. This month I thought it would be interesting to estimate the size of the potential prize to the UK invoice finance industry, in terms of market growth, if some of those issues were addressed. Therefore I have estimated the number of UK businesses that are potentially eligible for invoice finance.

According to statistics from BIS (The Department for Business Innovation & Skills), there were 4.8 million private enterprises in the UK at the beginning of 2008 (excluding the not for profit sector).

A well known data warehouse currently records almost 3.4 million of these businesses on their database which represents approximately 71% of the total population of businesses.

From that database I selected only those businesses that are categorised as being within industry sectors that are likely to be eligible for some form of invoice finance e.g. recruitment businesses, manufacturing etc. This yielded a total of just over 880,000 businesses.

I then applied a size criterion and excluded any businesses turning over less than £200,000 per annum. This reduced the number of potentially eligible businesses to c. 291,000.

There are a further c. 142,000 businesses, within those eligible industry sectors, that have annual turnovers of between £100,000 and £200,000 per annum. Including these would increase the total target market for invoice finance to 433,000 UK businesses.

According to recent statistics from the ABFA, at the end of Q1 2010 their members were servicing 41,275 existing factoring & invoice discounting clients.

These existing clients represent just 9.5% of the potential target market for invoice finance, and c.0.9% of the total number of businesses in the UK. Even accounting for the clients of non ABFA members and striking out a proportion of the target market that may not be suitable for other reasons, the market share of the invoice finance companies is still small.

The potential prize to the invoice finance industry is the possibility of substantial growth in client numbers for those invoice finance companies that are bold enough to address some of the issues that I highlighted in my previous article, The Secret To Selling More Invoice Finance.

Glenn Blackman MBA MCIM writes regarding invoice finance and related matters at www.glennblackman.co.uk. Glenn is also the Managing Director of Cashflow Acceleration Limited, a specialist invoice finance brokerage.

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