Do Businesses Want Selective Invoice Finance And Invoice Auction Sites?
Recently a number of invoice finance providers offering selective facilities, where the client can select specific invoices to finance rather than receive finance on all invoices, have entered the market and a few invoice finance auction sites have been launched.
We wanted to understand the level of demand for selective invoice finance and for the use of "auction" style sites for invoice finance, so we surveyed 100 randomly selected SMEs (Small and Medium Sized Enterprises).
Selective Invoice Finance
Firstly, we asked them:
"Would you expect businesses using invoice finance to prefer to receive funding against all their invoices or only invoices that they select?"
- 63% of respondents thought that businesses would want funding against all their outstanding sales invoices, which is traditionally how the invoice finance market has operated, and is called "whole turnover" invoice finance.
- 37% of respondents thought that businesses would want to select particular invoices against which to receive funding.
This suggests that there is a clear niche for selective invoice finance although the majority seem to favour whole turnover style facilities which are more traditional within the industry.
Invoice Auction Sites
Secondly, we tried to understand opinion about invoice finance auction sites by asking:
"Would you expect businesses using invoice finance to prefer to receive funding from one named financier that they select; or from the financier that can provide funding at the most competitive price via an auction site?"
- 61% of respondents said "one supplier".
The main reasons they gave for this choice were the hassle they expected to be involved with using an auction site and missing out on the relationship that they would build up with their financier.
- 39% of respondents chose the auction site option
They said their reasons for doing so were that it would be cost effective, and able to be used when they wanted.
Our findings suggest that whilst the traditional approach to invoice finance is still the most popular i.e. whole turnover funding from a company the client selects, there is a clear niche for invoice finance auction sites and selective invoice finance facilities. Furthermore, removing the perception of "hassle" and overcoming the relationship issues could make invoice finance auction sites even more attractive to invoice finance users.
Source: UK Factoring & Invoice Discounting Market Research Summary – Part 3 - 14th May 2013