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Recent figures in the Asset Based Finance Association report that as by the end of 2010, less than 43,000 UK businesses use invoice finance provided via their membership. This represents just 0.73% of the count of UK businesses currently classified by Dun & Bradstreet’s Marketplace of UK Businesses Database.

To understand more about more about a number of the reasons of the low adoption of invoice financing, 100 SMEs (Small & Medium Sized Businesses) were involved in a survey conducted through phone interviews to learn more of their outlooks in invoice finance.

Those businesses were asked:

“Why do you think that so few businesses in the UK use invoice finance?”

These are the results:

41% said caused by cost.

31% said that it wasn’t promoted enough and businesses hadn’t heard of it.

18% said it was easier to use overdrafts or loans.

10% said it was the bad status they connected to aided by the products.

These thought-provoking answers show how poorly these invoice products had been promoted and known mistakenly.

Here are some outline on where these businesses looks like it’s misunderstood.

The Cost

Expense is a subjective measure, and it is often used like a catch all reason not to do something. In case a business assesses its requirements for cash flow and plans the utilization of their cash wisely, then using invoice discount properly could save them money, enable them to achieve more growth and achieve higher profits than they might without using it!

Savings are made possible through supplier discounts and also the cash provided from factoring for cash payments.

Not Well Promoted / Never Heard About

This deficit of promotion of these flexible working capital products, by the invoice finance industry, is clearly an issue that is adding to the low take up of these products and the lack of knowledge about how exactly these facilities work. The future of the Invoice Finance industry depends on everyone consisted in it in helping the widespread of how Factoring and Invoice Finance works.

Simpler with Loans or Overdraft

Actually, there are a few conisderations to examine here.

Firstly, the quantity of work required of a client to run some invoice finance facilities is absolutely minimal. You will find products available on the market that have eradicated the need for contracts & lasting tie-ins, and let Businesses to have a utilize it when you need it. Undoubtedly, the best facility to arrange compared to overdraft facility would be the Invoice Finance.

Even if we assumed that overdrafts were easier to use, there are a number of attributes of invoice finance over overdrafts and loans:

* Overdrafts and financing will not grow in line with growth in business turnover whereas invoice finance does.

* Invoice finance’s degree of funding will probably exceed way ahead that of in overdrafts and loans.

* Loss making businesses and new start and growing businesses are favourable in invoice finance’s features although they have negative net worth or low credit rating of their trading history, unlike in overdrafts and loans where you are be required a net worth in the business and a profitable history of trading.

Bad Reputation

Only a few respondents felt that using invoice finance could be damaging of their reputation if other businesses knew about it. But they didn’t know the great news is that their funds flow could improve causing them to be more stable and bigger business since it is great for their reputation. Each time a business is asked by a client on their desire to expand and grow through invoice finance or factoring, it is most like viewed positive by them. Mostly the condition exists in the thoughts of the owner instead of the customer.

Summary

Inadequate promotion of invoice finance and invoice factor in UK businesses causing to less influence and familiarity with the facilities are plain causes. This along with a great deal of misunderstanding regarding the facilities that exist under the banner of invoice finance is probably what is currently causing the low level of take up of these flexible kinds of working capital finance.