It is the season of goodwill and Business Secretary Vince Cable may have earned some with his recent comments about the Vickers Report. However, despite the autumn statement, the future of SME lending remains unclear. What is more certain is the performance of invoice finance in 2011.

Despite the numerous proposals, initiatives, plans and schemes that we’ve witnessed over the past 12 months, the problem of improving small business credit, in particular from traditional lenders such as the part state-owned Royal Bank of Scotland, remains unresolved. Tellingly, there have been increasing calls for better use of alternative SME finance and one such format, invoice finance, is posting consistent growth.

According to the latest figures from the Asset Based Finance Association, business funding generated using invoice finance reached £16 billion in the third quarter of 2011, an increase of 9% over the same period in the previous year. One of the strongest areas of growth was in the export sector.

The growing rate of invoice finance, including SME finance products such as invoice discounting and factoring, underlines how companies are using the service to trade successfully. Invoice finance offers a means of quickly and efficiently raising capital to maintain cash flow.

Based on its performance in 2011 and the growing realisation that there is an alternative to traditional SME finance services, we should expect more growth over the next 12 months. In terms of the number of SMEs that use invoice finance, there is still a lot of room for expansion, and this is what could drive growth in the short term, in particular as a rising number of companies at the larger end of the SME scale become more aware of the benefits of this flexible SME finance facility.

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