New figures from the Asset-Based Finance Association (ABFA) have confirmed the key role invoice finance is playing in terms of SME finance provision in the UK. According to the industry trade association, use rose by 16% during Q4 2012.

Underlining the increasingly important role of alternative finance, the growth in invoice finance, to £62.5 billion over the three-month period, came as net lending registered by the Bank of England shrunk by £2.4 billion.

Looking ahead, the use of invoice finance is only expected to grow further. The ABFA predicts growth of 9% for 2013 to total advances of over £18 billion, compared with £16.6 billion for 2012. At the same time, the association expects the number of businesses using this form of third-party finance to increase by 7% to over 45,000 companies.

What will drive this growth? Continued caution from traditional lenders will be a factor, as will be the Chancellor’s decision to add invoice finance providers to the list of organisations able to access the Funding for Lending scheme, which recently received a £20 billion boost aimed directly at improving access to small business finance.

Going beyond 2013, the growing likelihood that alternative finance will play a key role in the British Business Bank suggests that the use of invoice finance can be expected to continue to expand in the short term as SMEs increasingly look outside the circle of traditional lenders for start-up funding and to maintain cashflow.

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