Bad credit ratings hitting SMEs

Invoice finance is a solution often used by SMEs either unhappy with their facility or unable to access bank credit at all!

The amount of UK companies carrying an unfavourable credit rating has risen during the last three years, which may be hindering their ability to obtain external business finance solutions, research has found.

A survey of businesses by a credit risk agency Graydon UK indicated that almost seven in 10 were deemed ‘high risk’ or ‘above normal risk’, in terms of defaulting on trade payments or getting into financial difficulties.

In a similar survey completed in June 2009, 60% had a similar high or above normal risk.

Only 5% were ‘low risk’ companies, compared to 13% three years, thus indicating that more companies were now adjudged to be ‘normal’ risks.

Spokesperson for Graydon UK suggested that businesses are increasingly looking to access alternative sources of finance as bank funding becomes less realistic.

Invoice Finance solutions for SMEs

For many SMEs and owner-managed businesses across the UK, invoice finance has become their first choice funding solution.

Invoice factoring and invoice discounting are two forms of invoice finance, which both work to release cash tied up in unpaid invoices.

And with many invoices taking up to 90 days to be paid, companies using such facilities often see huge boosts to their cashflow and amount of working capital they have available.

Why not browse the SBF website for more information on how invoice finance facilities work.