As more UK businesses complain about a lack of funding and others are scaling back operations or closing them, invoice finance is becoming an increasingly popular service with smaller firms.

It is clear that market conditions are becoming more and more challenging for businesses. Hot on the heels of the demise of Toys R Us and Maplin, Ultimo has announced that it is ceasing operations in the UK. The lingerie firm has cited “increasing competition and more cautious consumer spending due to the uncertainty surrounding the UK economy over the last 18 months” for its decision.

Tellingly, the latest Aldermore Future Attitudes report claims that almost 25% of SMEs are missing out on new business opportunities because of a lack of available funding. The total of 1.27 million firms represents a 4% increase over the previous year’s figure. In the south east alone, businesses are missing out on average annual income of £113,000. Notably, almost a third of SMEs reported that accessing funding and cashflow issues are their biggest concerns.

The continued cautiousness of traditional lenders is a key factor in the struggle to secure funding and a main reason behind the surge in the popularity of alternative finance, including invoice finance and asset-based finance. The latest figures from UK Finance show that invoice finance and asset-based lending was worth £23.4 billion at the end of 2017, an increase of 5% over the total at the same date in 2016.

This is how invoice and asset finance was used to finance a management buy-out of a business from retiring owners.

Interestingly, the data show a marked upturn in use of the services by smaller firms. According to the research, invoice finance and asset-based finance lending to smaller companies rose by almost 20% for the year, worth over £830 million. Greater awareness of these non-bank facilities and worsening market conditions are likely to be key drivers of this growth.

Further evidence of this trend can be seen in the opening of the new Countingup challenger bank that will focus on small businesses. According to the bank, a key decision behind the move was the neglect shown towards smaller firms by high-street lenders.

To date, 2018 has given small business owners little reason for cheer and there is little to suggest that this picture will change meaningfully in the short term. As the numbers above demonstrate, accessing funding will be vital to maintaining momentum amidst these challenging conditions and one of most important means of doing so will be alternative finance.

To find out more about A&T Business Associates services, contact Tony on 01903 602211 or tony@atbusinessassociates.co.uk.