With traditional funding for some businesses still being difficult to access, alternative facilities have proved invaluable. In Scotland, and throughout the UK, funding against outstanding invoices has been one particular growth area.
Invoice discounting, for example, increased by 16% on a national level in the last quarter of 2012, to £62.5 billion, according to the Asset-Based Finance Association (Abfa).
In the same period, lending by the banking system contracted by £2.4 billion, the Bank of England (BoE) reported.
For many businesses, invoice discounting facilities are cheaper, offer greater flexibility and are more accessible than a bank loan. Even with improvements in lending streams, many firms are now selecting invoice finance facilities over the alternatives.
The recruitment, construction and haulage sectors have particularly benefited from such facilities.
The success of factoring and invoice discounting has led Abfa to publish a code of conduct for its members. All 30 are presently signing up to a self-regulation process too, to further support the facilities.
Demand is likely to continue growing too, even with access to traditional commercial finance in Scotland and the UK improving.
The BoE has recently allowed factoring companies to work under the auspices of the Government’s Funding for Lending Scheme. The scheme is charged with boosting the amount of cash that firms can borrow.
Abfa also predicts further growth, with Kate Sharp, the chief executive saying:
“This is not a fully mature market. We believe that there is a fairly large, untapped source of funding need out there.”
The trade association for the industry estimates that up to 250,000 UK small firms are suited to invoice finance facilities.