1 In 3 Unaware of Invoice Finance
It's the question that all the sales people, and business owners across all the financiers in our industry sector keep asking themselves: "How can we increase the number of invoice finance clients?".
Our latest study addresses that question by uncovering the simplest barrier to product growth in the UK.
In very simple terms, our research found that:
- 32% of companies in eligible sectors had never heard of invoice finance - that is nearly 1 in 3.
- The simplest way to increase client numbers is to advertise and promote these products to build awareness.
- Help us raise awareness of invoice finance - #IFaware
When FundInvoice looked at satisfaction levels amongst users of factoring and invoice discounting, we found that 98% of existing users said that they were prepared to recommend these services to other companies. This was a very strong endorsement of these products. In market research terms, it is an "acid test" question. "Will you recommend the product?" If a respondent answers "yes" to that question, any other concerns they may have raised are likely to be minor. We also received some really positive comments from those existing users.
Despite this high level of satisfaction, it has been apparent for some times that user numbers are now growing significantly. As a benchmark we look at the ABFA (Asset Based Finance Association) client numbers. The latest ABFA statistics, to June 2016, show that in the previous 12 months, client numbers increased by just 0.3% (120) to 42,478 (exclusing import factoring, stock finance and ABL clients). Back in January 2014 our own estimate of the number of businesses using invoice finance in the UK was less than 1%.
So the disparity between the apparent high levels of satisfaction, and the low levels of user growth led us to ask existing users why they thought that would be the case. In previous research we identified that existing users thought that "lack of promotion and awareness" was one of the key issues - that accounted for 21% of their responses to that survey. Price was the top answer, mentioned in 51% of responses.
We also recently reported the findings from another survey, where we looked at awareness of advertising of receivables finance versus crowdfunding and payday loans. We found a 6.5 times greater level of awareness of crowdfunding advertising, and a 7 times greater level of awareness of payday loans advertising. All of which suggested that businesses were seeing very little receivables finance advertising. In yet another study we found that only 47% of existing receivables finance users had seen any advertising, during the last year. In 84% of those cases where they had seen something, it was only email based advertising.
So we thought we needed to check the market of potential invoice finance users, and measure their awareness of these products.
We randomly selected a sample of 200 businesses that were from within industry sectors that would be considered eligible for factoring or invoice discounting.
We asked them: "Are you aware that invoice finance can release the money tied up in your unpaid sales invoices?".
Only 68% (136 companies out of 200) said that they were aware.
A staggering 32% of respondents (64 out of 200) said that they were NOT AWARE of invoice finance.
Percentage Using IF
Interestingly our research also identified 2% (4 respondents) within our sample of 200 that were already using either factoring or invoice discounting.
These results suggests that nearly 1 in 3 potential users of factoring and invoice discounting are not even aware of these products.
Marketing and promotion to educate this segment is likely to lead to an increase in receivables financing users.
Source: Awareness of Invoice Finance Study - October 2016 (200 respondents from randomly selected companies from eligible industry sectors for invoice finance)
See also updated article: Invoice Finance Market Sizing 2019