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Invoice finance: In or out?

15th May 2017
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MarketInvoice co-founder Anil Stocker challenges some of the entrenched attitudes practitioners have about invoice factoring.

When piloting a new service and commission structure for MarketInvoice in the UK, we met accountants across the UK to understand their views on invoice finance and how we can work better together.

These conversations confirmed there is some cultural resistance, with invoice finance stigmatised as “pay day loans for business” - a last resort for failing firms. To us, the lack of awareness of invoice financing options such as our online model was startling.

Accountants are particularly important to MarketInvoice. With the launch of MarketInvoice Pro, our long-term facility to lend against clients’ complete invoice book, professional advisers are an important way to move towards servicing larger businesses with a more regular funding need.

Contrary to what many accountants assume, invoice finance is successfully used by tens of thousands of growing companies in the UK. Hundreds of thousands qualify and can benefit from this form of funding. More and more SMEs are replacing traditional overdrafts with invoice finance (ABFA, Q1 2017).

Many successful fast growth companies use the service as it’s the only option that can grow in line with the business and smooth cash flow to help companies meet payroll demands, product development and growth opportunities while waiting for their customers to pay.

These are high quality growing businesses in the technology, media, information and communications sectors as well as transportation and large-ticket wholesale sectors. For example, MarketInvoice works with companies turning over £500,000 all the way up to those turning over upwards of £10m.

The poor reputation associated with invoice finance is a legacy from older, more intrusive lending processes. Most of the things that put accountants off, such as the time taken, unrealistic costs and hidden fees, have been eliminated by online systems that can process an application within an hour.

And live links to accountancy software such Sage or Xero reduces the time it takes to reconcile ledgers and report on payment status. With more lenders moving online you can now get very competitive deals on invoice finance.

Average charges start at 3% and can go up to 20% in APR terms for small facilities offered to new- start businesses - this is entirely comparable to loans or overdrafts for example where banks can charge up to 20% in APR terms for smaller loan sizes.

At MarketInvoice, we are determined to convince accountants that invoice finance can unlock more cash than other products. And it’s a better way to get funding than equity - clients can use their invoices to raise money instead.

We expect accountants to be great partners for our business, but first we need them to open their eyes and get accustomed to the innovative ways of online finance. There are already a lot of comparison and brokerage sites that are attracting enquiries. Business owners are going online themselves, when their accountants could be helping them.

Our answer to reluctant accountants is that they need to keep up with what’s happening in financial technology to continue helping their clients with finance.

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