Keywords: einvoicing, electronic invoicing, e-invoicing, invoice finance, Skipton Business Finance, Asset Based Finance Association, invoice financing

Invoice financing 'gaining credibility'

Anna Bowsher | News | 4 July 2012

• Print
•        

For businesses relying on a steady stream of cash to stay afloat, tough bank lending criteria coupled with late payments from buyers can cause serious problems.

That's why many are turning to invoice finance as a way to tackle both of these problems, and it's paying dividends for the companies that provide it.

Skipton Business Finance is one of them. It has just reported a record first half with a 50% increase in deals during the six-month period.

It puts the rise down to the growing recognition of invoice finance as an alternative to traditional bank lending at a time when many businesses are struggling to access the latter.

Invoice finance enables businesses to release cash tied up in their sales invoices before they have received payment from the buyer.

This allows them to gain fast access to the majority of the cash owed to them and also eliminates the problem of late payment. 

Factoring is one type of invoice finance that can be used, and involves selling invoices to a third party at a discount in order to gain instant access to the money.

Another type is discounting, whereby businesses borrow a percentage of their sales ledgers from finance companies like Skipton Business Finance and use their unpaid invoices as collateral.

And of course for those using electronic invoicing the money can be in the bank even faster, while the window for taking advantage of dynamic discounts is larger because the delivery of e-invoices is instant.

Andy Grantham, Sales and Marketing Director at Skipton Business Finance, told the Yorkshire Post that invoice financing is "gaining credibility" as a means of funding business.

"It used to be very expensive, certainly more expensive than an overdraft.

"Previously it was the lender of last resort but now every bank has its own invoice finance business. It is funding businesses that would not get access to finance otherwise."

Earlier this year, the Asset Based Finance Association released figures showing that organisations taking advantage of invoice financing in 2011 enjoyed an average 13% increase in their sales.