- 16 May
Factoring & Invoice Discounting The Solution For High & Fast Growth Businesses
Invoice finance facilities such as factoring and invoice discounting have always been seen as the solution for high growth businesses and this is confirmed by the ABFA (Asset Based Financing Association) statistics to December 2010.
They show that amongst the ABFA's members their client businesses grew their sales by 11% over the previous year. This rate of growth is enormous compared with the growth in GDP (Gross Domestic Product) within the UK of just 1.8% when Q1 2011 is compared with Q1 2010 (OK the figures are not directly comparable but it illustrates the point). Even more interesting is that the invoice finance users achieved this growth rate despite a 5% decline in client numbers. This means that the actual increase in client sales volumes was closer to 16% amongst the factoring and invoice discounting users.
Factoring and invoice discounting are perfect ways to fund fast growing businesses. The issue that they face in an overtrading position is that they need the money from their sales, before they have been paid, in order to purchase supplies, materials, staff etc in order to fulfil futher orders. Factoring and invoice discounting bridge that cash flow gap, releasing a proportion of the client's sales invoice value immediately. This can then be used to pay creditors and suppliers.