Supply Chain Finance Initiative To Improve Cash-Flow For Small Business

supply chain financeThe Prime Minister David Cameron is discussing a scheme to get the largest UK Companies supporting its smaller supplier companies.

The supply chain initiative has been suggested to work in the following manner. The large company receives an invoice from its smaller supplier. The large Company notifies its bankers that the debt (invoice) is approved and will be paid as per credit terms (30,60 or 90 days etc.) The Supplier is then able to approach its bank and borrow up to 100% as a cash advance against that invoice value. Thus helping the suppliers cash flow.

I know the Prime Minister is only trying to help, but this exact same product exists already, widely used and has been around for decades. This product is know as Invoice Finance… some may know it as debt factoring or invoice discounting.

This Government initiative just seems like another headline grabbing sound bite. The government really should spend their time concentrating on calming the markets and restoring confidence, reminding people the world will keep on spinning and massive opportunities exist out there.

If you would like to read the more on this article click here. If you would like to know more about existing cash flow finance products including factoring and discounting click here

Invoice Finance

Invoice finance has continued to grow in popularity for both SMEs and larger companies according to a new economic report and quarterly figures from the Asset Based Finance Association (ABFA).

Total advances from members currently stand at £15.7bn, showing strong year on year growth of 12%. This growth comes on the back of continued growth in advances over the past five quarters and shows that UK and Irish firms are increasingly opting for this type of finance over other forms of lending.

The latest figures also show invoice finance clients are again choosing not to access all of the funds available to them. Total available funds this quarter were £22.2bn, with £6.5bn of finance available but not drawn.

Of the total funding provided by members, SMEs received almost 40%, or just over £4bn this quarter. A decreasing gap in the level of advances between SMEs and businesses with turnover above £100m suggests a growing confidence amongst SMEs as they get comfortable with increasing debt levels. This is supported by total clients’ sales growing 14% over the past year to reach £59bn.

The latest ABFA economic report also shows that export and import factoring have both grown substantially, enjoying a year on year rise in client sales of 48% and 47% respectively. This leap in demand for import and export factoring indicates that while the UK market remains sluggish, clients are looking to customers outside of the UK to buy their products, and are choosing this type of finance to help facilitate overseas trade.

Credit protection payments by ABFA members to their clients have also continued to decline, dropping by 27% over the last year to total £4.9m, consistent with the UK wide trend of lower default rates on loans and a stable rate of write offs. Together with the shortening average debtor day numbers both these factors reflect one of the key product benefits of asset based finance, namely introducing firmer debtor disciplines.

Phillip Evans, Director at Enable Corporate Strategies Ltd. “The report from ABFA is inline with our experience as we are seeing our clients with growth aspirations turning to invoice finance as one of their key enablers for growth. Used properly invoice finance is a very viable funding solution as part of the overall business finance package.”

Kate Sharp, chief executive of the Asset Based Finance Association, said: “The figures in our new economic report indicate growing business confidence amongst invoice finance clients, both SMEs and larger firms. This contrasts markedly with the general negative sentiment concerning the state of the wider UK economy and a general contraction in the stock of lending.

“Firms using invoice finance are seeing rising sales and are continuing to have access to an ample supply of finance. With total client numbers rising by 244 in the last quarter, the invoice finance sector is providing much needed finance to many UK and Irish businesses and is, and will continue to be, a significant contributor to supporting the wider economic recovery.”


Invoice Discounting Is It The New Overdraft?

Traditionally business owners have turned to their bank manager when proposed expansion or investment has meant that they require additional funding for their business.  The bank manager has normally responded by granting an overdraft facility or agreeing a medium term loan.

However the major high street bank are looking to shore up their severely weakened balance sheets and part of this process has meant a reluctance to lend (particularly to cash-strapped owner-managed businesses) and a significant hiking in their fees and charges in the process.

The benefits of Invoice Discounting compared to an overdraft facility are clear:

  • More generous funding criteria – up to 90% of outstanding debtor balances.
  • Less personal security – whereas overdraft is often secured against personal property Invoice Discounting require little or no personal security.
  • Equivalent or even lower charges – with bank interest rates rocketing, Invoice Discounting now looks very attractive in comparison.
  • Less negotiation – rather than constant and protracted negotiations to increase limits the Invoice Discounting facility grows with the business’s working capital requirements.

These facilities are completely confidential and easy to manage.

One perceived downside of these facilities was the fact that the client was tied in to a long term contract, but for the right clients, can arrange an invoice discounting facility on a rolling monthly basis, so if you don’t like it you can leave within 30 days

Apply Now for a Risk Free Invoice Discounting Quote

Business Cash Flow Getting Tougher?

Business cash flow is one the the major reasons why businesses fail. Your Company could have created a fantastic product and a good loyal customer base but if you have a significant client that goes bust or your regular customers start paying you later than you can handle, you will have a serious problem within your business.

Owing to the fact that traditional banks are still reluctant to extend credit terms in the way they used to, you the business owner or Director really need to have a robust and dependable action plan if this happens.

A cash flow problem renders a good balance sheet or profit and loss at the end of the year irrelevant. This is where Enable Invoice Finance comes in. Our dynamic business finance packages are designed specifically to track your sales and fund up to 95% of the invoice value on the day you issue to your customers.

For a more detailed look at invoice finance and obtain a risk free quote to see if invoice finance is cost effective for you please call Phillip Evans direct on 0797 0500425

Debtors: late payment on invoices biggest concern to business

Getting paid within the required credit terms is one of the most demanding aspects of running a business in the current economic climate, according to a survey of small and medium-sized enterprises.

The survey showed 27 per cent of responding businesses are waiting more than two months for payment. This was an increase of two per cent on a corresponding survey conducted nine months ago.

The number of businesses having to wait more than 70 days for payment had also risen by five per cent. Other challenging business tasks cited by the SME respondents included settling supplier payments on time (14 per cent), paying VAT/PAYE (13 per cent) and planning capital expenditure (12 per cent).

Cash Flow Squeeze

When customers are looking for longer credit terms and suppliers are wanting shorter payment terms the businesses in the middle suffer from a classic Cash Flow Squeeze resolving this dilemma is often the secret to your business success.

Sales Finance Could Resolve Your Cash Flow Squeeze

With the right kind of sales finance in place you can often satisfy your customers requirements and thus win more business while at the same time have sufficient cash flow within the business to pay your trade suppliers on time and in some cases ahead of time often allowing your to negotiate discounts for prompt or early payment.

For more information on Sales Finance including, Invoice Factoring and Discounting or International Trade Finance can help your business grow and resolve your cash flow squeeze please call Phillip Evans direct on 0797 0500 425 or follow the links provided