Finance for Small Businesses

Boom in Invoice Finance for Small Businesses, Reports ABFA

The Asset Based Finance Association (ABFA) says there has been a big increase in both the amount of finance advanced to smaller businesses and the use of invoice finance in particular.

Invoice Finance a Popular Choice for SMEs

The ABFA, which represents the invoice finance and asset based lending industry in the UK and the Republic of Ireland, has reported that the amount of finance advanced to UK small businesses through invoice finance jumped by over 60% in the last year, rising from £435m in the previous year to a four-year high of £711m this year.

Invoice finance – borrowing against unpaid invoices – is particularly popular, particularly among SMEs. The ABFA says that businesses are increasingly moving away from traditional finance providers and turning to other options such as invoice finance, resulting in the highest amount of finance advanced to the UK’s smaller businesses is the highest year on year boost since the recession.

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.”

Finance Options to Grow Your Business

Smaller businesses accessing invoice finance borrowed an average of £52,000 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.

The total amount advanced to UK and Irish businesses through asset-based finance (encompassing both invoice finance and asset based lending) by the end of 2015 was £19.3bn, compared to £18.9bn in the previous year. Around 80% of asset-based finance is invoice finance, while the other 20% is asset based lending that allows businesses to borrow not just against debts, but also against other assets such as equipment, stock and property.

However, the ABFA says that while many businesses are making use of asset-based finance, there are still some businesses owners who are unaware of the full range of finance options available. The ABFA have worked with partners in the industry to solve this problem and the result is a new book, Business Finance Guide: a journey from start-up to growth, which was launched in June by the British Business Bank and the ICAEW Corporate Finance Faculty.


An interactive website to accompany the book and support businesses has also been launched, which guides businesses through the process of identifying the best finance solution for them.

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

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