Invoice finance could be the salvation for SME difficulties

Johnson Reed
2m read

In a world where small companies need to preserve cash resources as much as they can to make funds available for extraordinary costs and emergency situations, it’s refreshing to learn of a means of extending your credit even further. Invoice finance, or cash flow finance, has been available for some time, but there appears to be a degree of ignorance about the facility, and the number of companies choosing this route has remained fairly static.

In recent research by Hitachi Capital Invoice Finance, it was revealed that as many as 49% of companies are turned down following their first application for an overdraft or a loan. But only 10% of SMEs use invoice finance as a means of improving their cash flow. Instead, many companies are choosing more expensive options for funding their businesses. 21% choose bank overdrafts and there are even 13% of companies that will resort to credit cards for raising funds. This is possibly because invoice finance is relatively new and many don’t understand how it works.

John Atkinson, Head of Commercial Business at Hitachi, said of the situation,

“I believe that SMEs really do need more funding to support growth and, with banks still reluctant to lend to many businesses, finding innovative ways to support cashflow and allocate capital to SMEs is essential.”

If you’re wary of such schemes, now might be the time to give it a go. You can arrange a trial period of just six months if you’re dubious about the advantages. It could be just the type of help you’ve been looking for during these difficult times.