In financial news this weekend it was revealed that Vince Cable is planning to extend the Funding for Lending Scheme (FLS) to Asset Based Lenders (ABLs), which could prove a welcome shot in the arm for many small businesses who are finding it difficult to obtain traditional bank finance.
I also believe it is positive recognition for an industry which works hard to provide much-needed funding during these difficult times but doesn’t necessarily get the mainstream publicity it deserves.
With over 40,000 businesses in the UK using the services of an invoice financier and total lending facilities being made available through invoice finance in excess of £30bn, asset based lending should be viewed as a popular mainstream alternative to borrowing from the banks, rather than a fringe market.
Just some of the benefits an invoice finance facility can provide include the following:
- More cash made available than an overdraft – usually twice as much.
- Less personal security is required, so meaning there is no need to put up your home as security.
- The facility is linked to your sales, not your historic balance sheet, and will therefore grow with your 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 situation or highly geared.
With such benefits, it is surprising that the flexible funding offered from the ABL market is not recommended more by financial advisors, especially as it is currently so difficult to obtain traditional bank funding.
There is obviously work to be done by the industry as a whole to promote invoice finance, to ensure the message gets out that there is money to lend and an appetite to match. However this news can do the market no harm.