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

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

Invoice finance, including invoice discounting and factoring, is a proven way to grow your business. This funny, Alan Partridge style Fast Finance Guide from SME Invoice Finance introduces business owners to invoice discounting and factoring to improve cash flow. In this comedy video, the Alan Partridge character answers your question: How does Invoice Discounting or Factoring work?

As you’ll see from the video, it’s a lighthearted way to tackle a fairly ‘heavy’ subject and to introduce businesses to invoice finance. Making the service more widely accessible to owner-managed businesses is critical to the future success of small businesses in the UK.

Please feel free to forward the link below to your friends, colleagues or anyone else you think might enjoy it.

http://www.youtube.com/watch?v=ofYpLG4-gvQ

Click here to to watch the SME Fast Finance Guide

Contributed by SME Invoice Finance