Firstly, we asked 100 randomly selected SME businesses why they thought far more customers used overdraft than invoice finance. Their suggestions were as follows:

• 41% said overdrafts are everywhere, the bank offer them as soon as you open an account
• 24% said overdraft is the norm and businesses probably haven’t heard of invoice finance
• 24% said banks offer overdraft as standard
• 8% said invoice finance is far more expensive than overdraft
• 3% said overdraft is standard, invoice finance is specialist

That means that in 92% of cases the primary factor mentioned was the perception that overdrafts are the “standard”. In addition, some 24% of respondents specifically mentioned, without prompting, that a lack of knowledge of invoice finance may be partially to blame.

These are awareness and perception issues that could be tackled by the invoice finance industry.

We went on to ask those same SMEs what would make them switch from overdraft to invoice finance. The top answers were as follows:

• 68% said invoice finance being cheaper
• 22% said increased funding

In order to achieve a greater market penetration, this research suggests that the invoice finance industry should consider:

• Working to find ways to promote invoice finance as a funding option earlier in the lifecycle of a business, perhaps even before the business even opens a bank account
• Raising awareness of invoice finance as a funding option generally
• Focusing on the increased funding aspect of invoice finance over overdraft
• Seeking cheaper ways to structure invoice finance to better compete with overdraft

Article contributed by Glenn Blackman MBA MCIM, Managing Director of Cashflow Acceleration Limited, a specialist invoice finance brokerage. Glenn also writes regarding invoice finance and related matters at http://www.glennblackman.co.uk/

The website, which went live on 20 January 2012, allows small and medium-sized business owners to look for alternative forms of funding, including invoice finance, asset-based lending, trade finance as well as business loans. The Finding Finance specialist advisers are based throughout the UK and do not charge users or take a commission from lenders helping ensure owners get the best deal for their business.

Carl Jackson, head of RSM Tenon’s Recovery service line, said: “At a time when there is considerable debate about the availability of funding for small businesses, it pays business owners to familiarise themselves with the full range of funding options available. A traditional overdraft is often insufficient to support a growing small business and there are a range of alternatives offering companies increased funding, greater flexibility and, importantly for many business owners, reduced personal risk”.

Nearly 42,000 businesses in the UK are estimated to currently use invoice finance, a funding solution whereby a business owner bypasses the normal 30-day plus wait for payment of their invoices. Invoice Finance companies provide immediate funds against invoices raised, greatly assisting both owners of fast growing businesses and those with cash flow issues. The amounts borrowed under this type of arrangement have grown considerably in recent years as has the use of Asset Based Lending which involves borrowing against other business assets such as stock, plant and machinery and property as well invoices.

“Our industry’s opinion of these funding models has changed,” said Carl Jackson. “A number of years ago, they were thought of as a backstop rather than first choice solution – as funding has become scarce and people have begun to realise that the flexibility and terms of such funding models can be competitive, their popularity has risen. They are not the solution to every funding problem but in the current climate every business owner should know what is potentially in the finance locker”.

Article contributed by RSM Tenon

John Beaney, Head of International, HSBC Invoice Finance (UK) Ltd

Two thousand and twelve will be a defining one for international receivables finance and the factoring industry. The economic conditions are likely to challenge us whether it is through slowing growth in the emerging economies of the world, an election year in the US and recession – and continued fragility – in Europe. It is a year in which we have the ability to demonstrate our value to shareholders, clients and indeed governments.

Today’s regulatory framework prefers products which are efficient in the use of a bank’s capital and that is a huge opportunity for our industry. Services which help support sales when orders can be hard to come by are needed by businesses. Enabling them to offer attractive terms even to new customers and in new markets makes what we do doubly relevant.

To fulfil our potential, however, we have to deliver on our promise of excellence in credit management, supporting sales to sound businesses and helping clients to avoid losses when failures occur. We must continue to use our understanding of receivables to successfully balance risks and reaffirm our credentials as lenders of first resort.

HSBC starts the year in excellent shape. Our UK receivables business increased support for international business significantly in 2011. We’ve built this success on a service platform that earned us the recognition as ‘Best Factor’ by Trade Finance Magazine and ‘Best Commercial Credit Team’ from Credit Today and is also reflected in accreditation by the Institute of Credit Management, so we look ahead at 2012 with confidence.

Josep Selles, General Manager of Eurofactor Spain

Based on the statistics taken from the end of November 2011, we can say that this has been an excellent year for the factoring industry in Spain. Considering the economical environment, the flat consumer rates, the country not in recession but growing at just around one per cent, a growth of 9.6 per cent is a figure we would have taken at the beginning of the year.

With reference to the annual figures we can observe that domestic factoring is only 6.5 per cent up and the weight of the growth of the sector relies on international factoring (26 per cent), as export factoring was the one that grew the most (28.2 per cent) – probably a consequence of the fact that the Spanish companies which have a competitive product have increased their exports, trying to find markets with a higher appetite than ours.

The main problem has been how to deal with the portion of factoring where the public administration is the debtor. The traditional delay of payment within the public sector has increased strongly, creating a lot of difficulties – for the industries that were unable to advance the new invoices as the old ones remained unpaid, and for the factoring companies that have been increasing the portion of this business in their portfolio.

To be honest, it would be good to know someone who could accurately predict what is going to happen even in the next five minutes, economically speaking, because as I write this, what I say could quickly become ‘factoring fiction’.

We have had a change in Government but also, more importantly, a change of policies in the European Central Bank that has relaxed the financial constraints of financial institutions; this situation may lead to a certain recovery, but I’m afraid that only in the second half of the year.

I have no reason to believe that the factoring industry will not maintain at least the same positive trend that it started with in 2010 and maintained in 2011.  Also certain measures are being taken by the new Government to help the administrations to fulfil their commitments; a situation that may unblock the concentration of risk and allow us to offer more financing facilities to the industries.

Let’s keep the optimism. 2012 has an extra day. Let’s hope we will use it to improve the economical situation, not only in Spain.

Ken Hitzig, Chairman of the Board, Accord Business Credit, Canada

Our outlook a year ago was for no ‘double dip’ and no significant growth. We were right on both counts. While the economy in the U.S. was very weak, some improvements were noted in the second half of 2011, notably growth of GDP and a lowering of unemployment. However, the rate of improvement was small and if this continues it will take many years to return to ‘normal’ conditions.

There was some deterioration in the Canadian economy in 2011. GDP growth was very low, and although unemployment figures fell, the number of people out of work remained painfully high. The resource sector, a major part of the Canadian economy, suffered from a world-wide glut of oil and gas. A major confrontation between the environmental movement and the resource industry is looming for 2012. The resource people need to build thousands of kilometres of pipelines to the Pacific Coast (to ship to an energy-hungry China) and to the southern U.S. where there are refineries but not enough oil. Tens of thousands of jobs hang in the balance. There will be tremendous pressure put on the Obama administration by the labour movement, on the one hand, and the environmentalists on the other. Competition in the Canadian factoring market continued to be intense in 2011. Total volume handled declined ten per cent from the previous year to about CA$4.5 billion. The number of players declined as well, to 51 at 31 December 2011 from 55 a year earlier.

The market continued to be dominated by two companies, National Bank of Canada and Accord Financial; together they control two-thirds of the total volume. The main competitors for the non-recourse factors are the credit insurers who offer attractive rates but tend to be fickle with credit.

At this point (mid-January 2012) it is difficult to foresee any significant change in the economy for 2012.

Current exchange rate:

1 euro = 1.30127184 Canadian dollars

Marius Savin, Director of Transaction Banking, Standard Chartered Bank Singapore

The key industry players managed to grow their business further in 2011 across a variety of markets, after strengthening their credit models in 2010. In my view, this was the result of better focus on the innovative client value proposition across the entire supply chain as well as ‘slimming’ business models. Though these elements were always present in the peoples’ minds, the challenges faced from the financial crisis made them a must for business survival.

The 2012 outlook seems more challenging as there are many open issues still unfolding; however I do believe that there will be growth opportunities (no matter the size of the business) either by capturing new developing trade flows (Asia, Africa, Middle East) or by identifying niches (specific industries or trade corridors). At the same time, balanced resource/capabilities allocation and efficiency will become the primary focus for successful management.

Article contributed by BCR Factorscan

The plans are at an early stage and it is unlikely that Nationwide will be in a position to offer SME loans until at least next year.

However, the idea has already won support politically amid fears that SMEs are not able to access the credit they need to survive and grow in an increasingly difficult economic environment.

Chancellor George Osborne told the Treasury select committee this week that the national building society was weighing up the move, which he said would bring competition to the SME market.

Graham Beale, chief executive of Nationwide, told the Financial Times: “We have identified that SME lending would be a good strategic fit to our existing business, given our strong franchise, broad distribution network and current exposure to personal current accounts and commercial lending activities. We are developing plans to enter the market, but this will not be for at least 18 months or longer.”

Invoice finance and invoice discounting are used by small and medium sized businesses to improve their cashflow and fund their future expansion.
Prior to joining Aldermore, Ben held a variety of roles within the RBS Group, both with RBS Invoice Finance and Lombard Asset Finance.

Ben has considerable experience of working with SMEs in the West Midlands and Warwickshire.

Tony Smedley said: “I’m delighted to welcome Ben to the team at Aldermore Invoice Finance. Ben has a lot of experience working with small and medium sized businesses and I have no doubt he’ll be able to make a very positive contribution.”

Ben Hayward said: “Small firms in the Midlands area desperately need support from banks that are willing to listen to their needs and provide effective financial solutions. Aldermore has a strong reputation as one of the UK’s most innovative invoice finance providers and I’m excited about being part of such a dynamic team.”

Aricle contributed by Aldermore

Business turnover across five key sectors peaked during the third quarter of 2011 for the first time since the start of the financial crisis four years ago, according to the latest study tracking the performance of 3,500 businesses by Bibby Financial Services.

The Business Factors Index, which follows Bibby Financial Services’ clients across manufacturing, construction, business services, wholesale and transport, rose to its highest quarterly average since it began in 2007 pointing to a significant surge in performance in the third quarter.

The quarterly figure of 105.3 was substantially higher than the previous peak of 101.1 at the end of 2007, and only the third time since its inception that the Index has risen above the 100 mark that represents the level of activity in July 2007.

The turnover increase highlighted in the Business Factors Index echoes the latest GDP figures released on 1st November, which show the economy grew by 0.5 per cent over the same period.

The monthly breakdown reveals that while July saw a downturn from June, activity among small and medium-sized businesses rebounded strongly into August and accelerated in September to end the month at 110.2, close to the peak of 111.2 seen in March this year.

Across the sectors there have been some encouraging results in key areas such as construction which saw a quarterly rise from 98.1 to 116.8. And manufacturing also saw a significant quarterly increase from 116.6 to 122.0.

The report indicates that companies not only shrugged off the impact of the collapse in both confidence and asset prices in the financial markets in the wake of the renewed eurozone crisis, but may even have benefitted as productivity levels have evidently increased.

The large majority of firms are also now taking action to insure against any future downturn according to the latest Index, by cutting costs, improving supply chain management, implementing a growth strategy or even increasing prices.

However, the report for Q3 2011 does indicate that confidence among business owners is still waning despite the encouraging performance during Q3 and they feel the economy is not yet through the worst.

An additional survey of 450 small and medium-sized businesses which runs alongside the Business Factors Index shows that the number of companies describing current conditions as ‘very tough’ has risen since June. Nine out of 10 firms said they believed that the economic recovery would not be fully secure for at least another year and possibly three.

Edward Rimmer, UK chief executive of Bibby Financial Services, says: “The results from Q3 are a welcome shot in the arm for small and-medium-sized businesses as the first two quarters of this year had returned disappointing performance across the sectors.

“The increase in activity we have seen serves to underline just how important the role of the small to medium-sized business is in rebooting the UK economy. If the performance we have seen in Q3 continues, or even improves, it can only have a positive impact on the wider economic picture and areas such as consumer confidence.

“However something of real concern is the time businesses are spending chasing unpaid bills. “Almost one in 10 firms spend more than a week in every month pursuing debts and another seven per cent are putting aside four to five days on this task.

“This is a real issue for smaller businesses but there are some solutions to help deal with the late payment issue and free up cash flow. Invoice finance is one solution, which not only frees up cash flow but takes away the burden of chasing late payment and allows owners and managers to focus on other important core aspects of managing and growing their businesses.

”It is an issue we will continue to monitor and is certainly one that executives should look more closely at as they continue to manage their way through today’s volatile economy.”

The success of small businesses during Q3 in terms of increased productivity echoes the findings of the Bibby Financial Services future of business report 2020 Vision. The report suggests there could be up to 20 per cent more small to medium-sized businesses by the year 2020 as a result of the opportunities presented by e-commerce and technology.

Kate Sharp, chief executive of the Asset Based Finance Association (ABFA), says: “There are some really positive findings in the report which points to an increase in performance that is remarkable given the backdrop of the turbulence of recent months.

“Funding remains a key issue for small and medium-sized enterprises, so it is encouraging to see how many are preparing for a possible second downturn by investing in growth strategies, improving supply chain management and cutting costs.

“But clearly confidence is still a factor and we need to ensure the encouraging performance during Q3 is not overshadowed by talking up the spectre of a double dip recession.”

Further findings from the Index include:

Sector activity
• In construction the quarterly Index rose from 98.1 to 116.8
• Manufacturing also saw a significant quarterly increase from 116.6 to 122.0
• The wholesale sector saw quarterly increases at record levels rising from 121.2 to 145.1

Around the country
• In the North East of England 54 per cent of firms said conditions were tough or very tough, which is a significant increase up on 24 per cent from the previous quarter.
• In the North West the figure is 46 per cent and in Wales it was four out of 10. No company in the North West reported they were doing really well.
• In contrast just five per cent of firms in the South West took a gloomy stance while more than a third (35 per cent) said they were doing well.

Article contributed by: Bibby Financial Services

We wanted to gauge the level of demand for selective invoice finance and for the use of “auction” style sites for invoice finance, so we surveyed 100 randomly selected SMEs (Small and Medium Sized Enterprises).

Firstly, we asked them:

“Would you expect businesses using invoice finance to prefer to receive funding against all their invoices or only invoices that they select?”

63% of respondents thought that businesses would want funding against all their outstanding sales invoices, which is traditionally how the invoice finance market has operated, and is called “whole turnover” invoice finance. However, 37% of respondents thought that businesses would want to select particular invoices against which to receive funding.

This suggests that there is a clear niche for selective invoice finance although the majority seem to favour whole turnover style facilities which are more traditional within the industry.

Secondly, we tried to gauge opinion about invoice finance auction sites by asking:

“Would you expect businesses using invoice finance to prefer to receive funding from one named financier that they select; or from the financier that can provide funding at the most competitive price via an auction site?”

Interestingly 61% of respondents said “one supplier” and their main reasons for this choice were the hassle they expected to be involved with using an auction site and missing out on the relationship that they would build up with their financier.

39% of respondents chose the auction site option and said their reasons for doing so were that it would be cost effective and able to be used when they wanted.

Our findings suggest that whilst the traditional approach to invoice finance is still the most popular i.e. whole turnover funding from a company the client selects, there is a clear niche for invoice finance auction sites and selective invoice finance facilities. Furthermore, removing the perception of “hassle” and overcoming the relationship issues could make invoice finance auction sites even more attractive to invoice finance users.

Article contributed by Glenn Blackman MBA MCIM, Managing Director of Cashflow Acceleration Limited, a specialist invoice finance brokerage. Glenn also writes regarding invoice finance and related matters at http://www.glennblackman.co.uk/

Damon Walford said: “I’m delighted to be joining Aldermore, which is one of the UK’s fastest growing and dynamic new banks. Cashflow finance is critically important for SMEs across the country and Aldermore has a proven track record of developing a range of innovative financial solutions for British businesses.

“As the economy struggles to shake-off the effects of recession, business owners are looking for financial support to enable them to exploit business opportunities which present themselves. Aldermore is dedicated to helping SMEs and has exciting plans for the future and it’s great to be part of the team.”

Ian Wilkins, Group Managing Director of Commercial Finance at Aldermore, said: “I would like to extend a warm welcome to Damon and wish him every success in his new role. Damon brings with him considerable experience which he’ll be able to put to good use as he guides the business through the next important stage of its development.”

Aldermore recently announced that it made £150 million of invoice finance funding available to SMEs during September, an increase of 42% over the same period last year. Client numbers also increased by 19% over the past year. To put this achievement in context, data released by the Asset Based Finance Association shows that total advances made by all member firms grew by 12% during the same period and there was no growth in the total number of new clients.

Across all of its business lines, Aldermore has lent £470 million to small and medium sized businesses, taking the value of loans on its books to £970 million and total assets to more than £1.2 billion.

The bank has 8 regional business offices, providing invoice finance, asset finance and commercial mortgage facilities to more than 9,500 business customers.

Article contributed by Aldermore

With banks constantly missing lending targets, business owners are looking into alternative sources of finance to complement any existing banking arrangements.

At present the government’s attempts to push for banks to lend more under Project Merlin and to effectively distribute the liquidity injected by the treasury have disappointed in providing adequate finance for small and medium-sized enterprises (SMEs).

Nevertheless it is not necessarily productive to simply blame the banks. Fresh uncertainty over both the US economy and Eurozone’s abilities to tackle large deficits and a growing sovereign debt crisis has affected bank performance. Combined with the number of debt instruments on commercial banks’ balance sheets and the impending requirement under the Basel III agreement for banks to raise their capital reserves by between 9 and 10 per cent, some banks simply do not have the capacity to lend any more at present.

With traditional sources of finance more restricted, private high net worth individuals, who are currently achieving no return from deposits in banks, and institutional investors who are seeking returns on their capital can act as a complementary source of finance.

MarketInvoice effectively taps into these very significant pools of capital to channel non-bank funds to small and medium-sized companies.

Every year, UK companies take advantage of invoice financing on over £220Bn of commercial invoices through arrangements with banks and factoring companies.

At any time, £13bn worth is outstanding. At MarketInvoice we have trading statistics that show FTSE 250 companies (high street and household brands) paying SMEs as late as 90 to 120 days. Already under strain due to reduced bank lending, these SMEs are facing serious cash flow difficulties.

Traditional factoring and invoice finance can be ill-suited to these companies as they often require an entire sales ledger flowing through a factor. In addition, factors necessitate stringent criteria and often exclude certain types of invoice, such as export invoices, while typically requiring ongoing service fees and collateral requirements such as personal guarantees or all asset debentures.

MarketInvoice allows SMEs to get cash upfront on their invoices by auctioning them on an online marketplace. High net worth individuals and institutional investors place bids and advance cash to these companies in exchange for a small discount fee, which is driven down through a competitive auction process.

With no ongoing service fees, no requirement for collateral such as personal guarantees and the freedom to choose when and how often they desire to auction an invoice, it has seen quick take up as a credible alternative to traditional capital sources.

Today’s funding landscape confirms that it is unsustainable to rely solely on banks to provide the capital to fund small and medium-sized companies. MarketInvoice can act as a complement to traditional bank facilities while adding much needed competition to the finance sector.

With investors increasingly looking for alternative asset classes to invest in, it is time to push for greater innovation in financial services. Rather than relying on Government to legislate, UK entrepreneurs are trying to disrupt and level the playing field for access to capital”

Article contributed by MarketInvoice

The funds have been invested by a consortium of leading global investors, including funds managed by Goldman Sachs Asset Management, Honeywell Capital Management and the Ohio Public Employees Retirement System. Funds advised by AnaCap Financial Partners LLP (AnaCap), Aldermore’s existing lead investor, have also increased their investment in the business and Morgan Stanley Alternative Investment Partners, Aldermore’s founding investor alongside AnaCap, also retain their significant investment.

Phillip Monks, Aldermore’s chief executive, said: “We are delighted with the strong support shown by these blue-chip investors for our funding round and for the continued support from both AnaCap and Morgan Stanley. This investment gives us an excellent platform for continued growth and to offer real choice and competition in the UK banking market.”

Peter Cartwright, co-managing partner of AnaCap and non-executive director of Aldermore, said: “We are proud of the group of investors that has been assembled to support the continued growth and development of Aldermore and are collectively excited by the substantial commercial opportunity that remains available to Aldermore as high street banks continue to neglect significant sectors of the UK banking market.”

Article contributed by Asset Finance International