Alternative Invoice Finance Companies are continuing to grow, and are showing little sign of slowing down. As the industry matures and continues to find its place in the financial market, SME owners and managers are becoming increasingly aware, and comfortable with this type of lending. As traditional lenders continue to struggle in certain markets, the flexible, less risk averse approach of alternative lending in becoming more and more important.
Across Europe, around 23 million SMEs generated 3.9 trillion euros of value to the economy in 2016, employing around 90 million people. This goes to show the increasing importance of small businesses, not just to local economies, but to European and world economies.
These figures could suggest that all is rosey in the world of the SME. However, 60% of SMEs are still concerned about their ability to fund long term growth. More concerning is that 80 – 90% of SME failure is due to poor cash flow, most notably caused by late payment or lack of finance.
It’s here that the Alternative Invoice Finance Companies and other specialist lenders really come into their own. The good news is that around 52% of UK SME owners are now aware that there is finance beyond the banks (of course the bad news is that apparently 48% have no idea). Things like Peer to Peer lending, Invoice Finance (whether Selective Invoice Finance or full book factoring), Trade Finance and Asset Based Lending are becoming more and more normal. 15 years ago, there was a real stigma surrounding the invoice finance market – it was often referred to as the lender of last resort. Now, small business owners recognise that bank lending is not as available as it once was, and often Alternative Invoice Finance Companies can actually provide a more appropriate form of lending.
As always, the key is to think about what the money is for, how long you need it for, and how often you’ll need it. The alternative finance market in general gives borrowers a huge amount of variation to help them find the right product for them and their business.