Is that light at the far end of the tunnel?

Invoice finance solutions such as factoring and invoice discounting often work well to provide funding levels that grow inline with a business

With good economic news emerging recently, are we finally seeing light at the end of the very dark tunnel? Possibly, but for many businesses, they’ll need to make sure it’s not a freight train coming the other way!

It’s a well-known fact that more businesses fail whilst coming out of an economic recession rather than actually during the period of downturn. And with some green shoots of recovery emerging beneath the fallen leaves of recession, business will need to ensure they have robust and flexible cashflow to take advantage of any upturn in sales due to the better economic picture.

UK owner-managed businesses must be wary in case their long-standing bank facilities are not able to increase inline with their improved sales performance and support business growth. This is especially true of overdrafts, which can prove restrictive especially as they are often based on the last year’s financial performance.

Where else to turn?

Alternative external funding solutions do exist for owner-managed businesses, especially those looking to expand and grow their operations.

Invoice finance facilities, such as invoice factoring and invoice discounting, actually grow at the same speed the business does. More and more cash becomes available as more invoices are raised and sales volumes increase.

The benefits when compared to an overdraft are that:

  • It generates more cash than an overdraft – usually twice as much
  • Less personal security is required
  • It’s based on sales and therefore grows with the business - meaning you don’t have to keep going back to the bank asking for more!
  • It's not based on historic balance sheet performance and therefore is suitable for businesses in a turnaround or highly geared

It’s apparent that, in the current climate, invoice finance provides a much safer and more flexible funding solution for many SMEs by:

  • Providing certainty of contract (i.e. it’s never repayable on demand)
  • Offering increased funding linked to sales

Why not browse our website and find out a little bit more about how invoice finance works and how it could benefit your business, or give our team of experts a call today on 01756 694933 for a friendly no-obligation quote.