Invoice Finance boom for small businesses

Over £13 billion has been advanced to UK companies by the invoice finance and asset based lending (ABL) industry in the first quarter of 2007. The amount of funds advanced demonstrates the growing popularity among SMEs and large corporates to use assets as a means of funding business development.

These statistics come from the latest results from the FDA, the UK trade association for invoice finance and asset based lending industry. The first quarter report revealed that the industry is worth more than £40 billion already this year and, if growth continues, it is expected it will break the £200 billion barrier by December.

Of the 47,785 companies that accessed invoice finance and ABL funding, the biggest user was the services sector. The number of clients from this sector increased by 23%, overtaking manufacturing to become the industry's most prolific user. Other sectors that showed an increased appetite for invoice finance and ABL included construction (137% increase), and retail (61% increase).

An ongoing trend is the attraction of invoice finance and ABL for larger companies, using the product to help fund mergers and acquisitions. In the past year the number of companies using the finance option with turnovers of £10 million and above has increased by 14% with funds advanced increased by 45%, equating to over £7.5 billion to date.

Kate Sharp, chief executive of the FDA, said: "The industry has had a great start to the year, which is a growing acknowledgement of ABL as a prime source of corporate finance. The sector analysis is particularly interesting to note as FDA members are continuing to find ways of providing finance in business areas that have historically been more challenging, such as retail and construction."

"Companies are also more aware of the fact that not only are they able to raise finance against debtors, but that plant and machinery as well as other assets such as intellectual property or art can also be funded against. The industry is constantly evolving and the flexibility FDA members are able to offer clients is testament to the industry's popularity."

• You can also read Bytestart's Guide to Invoice Finance
• If you would like to find out more about a factoring, or invoice finance quote for your business, try our partners Lloyds TSB Commercial Finance.