Who Uses Invoice Finance And Factoring?
How Many UK Businesses Are There?
According to the House of Commons Library, at the start of 2014 there were 5,243,000 businesses in the UK.
What Percentage Use Invoice Finance?
The ABFA (Asset Based Finance Association) statistics to the end of Q3 2014 showed 42,294 businesses using invoice finance amongst their members (import factoring and stock/ABL clients have been excluded). The membership upon which the ABFA figures were based is shown at the foot of this article. The figures as at the end of Q4 2013 showed a total of 42,227 clients which one might argue is more accurately comparable to the figure for total number of UK businesses due to the date at which it was produced. However these figures are so similar that they make very little difference when calculating the market penetration.
Taking just the ABFA clients the penetration of invoice finance using businesses within the UK would be just 0.81% of UK businesses.
All the major invoice finance providers are included within the ABFA membership list but there are a numer of smaller invoice finance companies that are not members, maybe 20 or so in number. Even if we were generous in attributing up to 20% of additional client numbers to these non-ABFA members, the market pentration of invoice finance would still be below 1% of UK businesses but in reality I would estimate that they might account for only c. 3,000 of additional clients, which would bring the invoice finance market pentration up to just 0.86% of UK businesses.
Which Types Of Business Use Invoice Finance?
We conducted a study of 100 fast growing businesses (20%+ turnover growth in the last year) and we found that 12% of those questioned using invoice finance. We also identified a subset group of businesses that said that their turnover could not grow any faster. Of that subset, 52% said that they used invoice finance (factoring or invoice discounting). This suggests that fast growing businesses have a much higher penetration of invoice finance users than the general business population.
Since writing this article, there has been some discussion on the UK Invoice Finance Research Group (on LinkedIn) - you can see the various points covered either via the group or on my blog.
Note: The Q2 2014 ABFA statistics included submissions from the following of their memebers: ABN AMRO Commercial Finance, AIB Commercial Finance Ltd, Aldermore Invoice Finance, Ashley Commercial Finance, Hitachi Capital (UK) plc, HSBC Invoice Finance (UK) Ltd, Independent Growth Finance, JSM Finance Ltd, Bank of Ireland Commercial Finance, Belfast, Bank of Ireland Finance, Dublin, Bank of London and The Middle East, Barclays Trade and Working Capital UK & Ireland, Bibby Financial Services Ltd, BNP Paribas Commercial Finance Ltd, Burdale Financial Ltd, Leumi ABL Ltd, Lloyds Bank Commercial Finance Ltd, Metro Bank SME Finance, Cavendish Investments (Manchester) Ltd, Close Brothers Invoice Finance, Clydesdale Bank plc, Danske Bank, Danske Bank A/S, Positive Cashflow Finance Ltd, Quantum Factors Ltd, RBS Invoice Finance, Regency Factors Invoice Finance Ltd, Regency Factors plc, Easy Invoice Finance Ltd, Factor 21 plc, First Trust Bank, Five Arrows Business Finance plc, Santander Invoice Finance, Shawbrook Business Credit, Siemens Financial Services Limited, Skipton Business Finance Ltd, GE Capital Bank Limited, Ulster Bank Invoice Finance (NI), Ulster Bank Invoice Finance and Ultimate Finance Group plc.