- 13 May
21 Percent Plus Of Million Pound Companies Use Invoice Finance
Research and data suggests that at least 21%+ of £1M+ turnover businesses now use invoice finance.
21%+ Of £1M+ Businesses Use Invoice Finance
Recent research, and my own data calculations suggest that at least 21% of UK businesses, turning over more than £1 million per annum, now use invoice finance.
My own, somewhat conservative calculations and estimates, suggest that at least 21% of companies in the £1M+ category could be using invoice funding. Research by one of the invoice finance companies suggest that the take up could be as high as 27%.
Either way, this is a significant penetration, for over 1 in 5 companies of size, to be using receivables financing.
Why Do £1M+ T/O Companies Use Invoice Finance?
The correlations between usage, and turnover of £1M+ is likely to be driven by a number of possible factors.
Firstly, the provider's criteria tend to target these larger businesses. This is not true of all providers, some of the selective funders will accept single invoices from companies for just a few thousand pounds. However, in general, the established providers, that represent the majority of the UK factoring and discounting market, tend to look for £1M+ turnover businesses.
Secondly, a reasonable volume of turnover around that level, can achieve economies of scale for invoice finance pricing. The majority of whole turnover providers include some form of minimum fee with their facilities. The minimums tend not to go below a certain level, such that very small companies could find the minimum fee prohibitive. This may also be contributing to the usage amongst larger firms.
The Next Opportunity
The significant opportunity is for funders to target the sub £1M turnover segment. Usage amongst smaller companies is currently much lower, so there is an opportunity to convert more of these with lower minimum cost versions of these services. Cash flow acceleration will be just as relevant to smaller companies, as it will to larger organisations (perhaps even moreso).
Related article: Funding Startups And Small Companies.