Invoice finance providers continue to fund growth

Sema Fongod
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Touch Financial
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Firms using invoice finance saw a 6% growth in turnover for the first quarter of 2012, compared to a year earlier, according to new figures released by the trade association for funders, the Asset Based Finance Association (ABFA).

The level of cash advanced to these firms also increased by 4%, with £15.5 billion outstanding at the end of March 2012, which supported turnover of £59.2 billion for the three months to that date.

These positive numbers are tempered with indicators that firms using invoice finance remain cautious of taking all the funding available to them. Of the £22.9 billion in funding available to businesses, around a third (£7.5 billion) remained idle.

This reluctance to make fuller use of the cash flow support available has been a consistent feature of the ABFA statistics over the last year, and could imply that firms are reluctant to take more risk than they absolutely need to in order to keep going in tough times.

The chief executive of ABFA, Kate Sharp, said: "The new figures show a broadly positive picture, with both total funding and turnover from companies using invoice finance rising year on year, plus the number of clients increasing.”

She added: “However, the new figures also show a conservative approach to accessing funds from firms, with their appetite for new investment and maximising growth potential being muted."

SMEs link growth to access to finance

The growth figures recorded by ABFA reflect the sentiment from a recent SME survey by software provider SAP, where firms rated money and finance as the leading driver for commercial expansion.

According to the 250 firms interviewed by SAP, over nine out of ten made growth their main goal for the year ahead, with over eight of ten confident they will hit their targets. Nearly half of the firms are aiming to boost their turnover by more than 10%.

However, 49% saw access to funding as the major impediment to their aspirations. Innovation, management and technology were regarded as much smaller obstacles.

John Antunes, SAP UKI director for SME & Channels said: “In recessionary times some observers would assume that UK SMEs are happy to ‘batten down the hatches’ or consolidate their current market position. This report shows the contrary. There is actually significant appetite amongst UK SME businesses to be ambitious and grow.”

Business finance remains under threat

Despite the optimism of the SAP survey and the consistent growth reported by ABFA, firms are still finding it hard to access funds. The latest Federation of Small Businesses (FSB) ‘Voice of Small Business’ survey shows that four out of ten firms applying to big banks for credit are turned down.

The FSB continues to call for more competition in the banking sector, in the firm belief that this will improve access to cost-effective finance.

John Walker, FSB National Chairman, said: "If small firms cannot access credit it constrains their investment plans. We know from past research that many small businesses missed growth opportunities because they couldn't access the money they needed.”

Kate Sharp of ABFA also spoke of ‘missed opportunities’ when talking about the £7.5 billion unused invoice finance funds, made available to businesses, but not utilised in the first quarter of this year. It appears that while banks are holding back from lending, firms are also reluctant to take on the maximum credit available, and this could be threatening their chances to maximise growth.

This is a guest post by Yaser Ayub from Simply Business who offer a range of Invoice Finance solutions

References:

ABFA stats: http://www.abfa.org.uk/news/Q12012.asp?type=members

SAP: http://www.sap.com/uk/press.epx?pressid=19154

FSB : http://www.fsb.org.uk/News.aspx?loc=pressroom&rec=7750

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