Article - Why High Growth Companies Are Missing Out On Funding

We have conducted some research into the funding needs of fast growing companies (100 companies with 20%+ turnover growth pa) and the results have show a distinct lack of access to finance with 79% saying they could have grown futher had more finance been available. The irony is that more finance is available - high growth companies just don't seem to know how to access it.

There were 12% within our sample that used invoice finance, all of those said that they had sufficient funding to meet their needs as a high growth business. We asked the others if they had considered invoice finance but only 5% of them had.

The remainder were asked why they didn't consider invoice finance and these were the reasons that they gave:

  • 27.4% Invoice Finance wasn't mentioned as an option by the bank/accountant/adviser
  • 23.8% Never heard of invoice finance
  • 11.9% Thought it would be too expensive
  • 10.7% Wasn't a homeowner
  • 10.7% Poor/bad credit history
  • 7.1% Too small/not big enough
  • 4.8% Didn't think I would qualify/as already had a loan
  • 3.6% Though it was the last resort or for failing companies

I have taken each of those reasons and addressed them in turn below:

  • Invoice Finance Wasn't Mentioned - either by the bank, an accountant or an adviser. Unfortunately this is a common issues that we come across. These products are not always being given the profile that they deserve, hence the comparatively small number of companies that have accessed this kind of funding.
  • Never Heard Of Invoice Finance - again this is commonly heard and presents a huge opportunity for the invoice finance companies to address this issue.
  • Though It Would Be Too Expensive - it is interesting to note that all of these companies didn't even consider invoice finance hence they have not sought quotes, just assumed that the cost woud be an issue. There are deals currently available for single fee deals from just £2,400 per annum which could release large amounts of additional funding for a business.
  • Wasn't A Homeowner - this is not necessary. Again its a bit of a misunderstanding. Some invoice finance companies do ask for this but it is not the case with all invoice finance companies.
  • Poor/Bad Credit History - this is unlikely to be an issue for an invoice finance company as they base their decisions on the quality of the sales ledger rather than the prior history of the company directors. CCJs and previous defaults are not a barrier to raising invoice finance.
  • Too Small/Not Big Enough - again this suggests a lack of market knowledge, that is perhaps understandable. Invoice finance is an option for all sizes of business, there are specialist products for small businesses in particular.
  • Didn't Think I Would Qualify/As Already Had A Loan - again this is unlikely to be an issue unless the entirety of the book debts are being used as security for the loan. It is common for companies to have invoice finance alongside loans and overdrafts.
  • Thought It Was Last Resort/For Failing Companies - this may be a minority perception but the fact is that the number of invoice finance users in our sample of high growth businesses was 12 times the normal level we would expect to see suggesting that it is most popular amongst fast growing businesses.

Amongst the list of reasons analysed above there is a mixture of lack of awareness of the products and misunderstanding/misperceptions about invoice finance. Of the reasons given, none of them are barriers that could not have been overcome.

There is a huge opportunity here for the invoice finance industry to address these points and help fund even more high growth companies.

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