The changing landscape of invoice finance
Selling unpaid invoices to investors is one of the fastest growing areas within business funding.
Here at Trade Finance Global, we believe that Invoice Factoring and Invoice Discounting is hugely important for businesses to trade internationally.
Invoice finance, also known as export factoring is very common when trading goods and services domestically and globally. It allows sellers and exporters to trade on open accounts with clients, and can reduce cash flow problems within a business as cash from the invoices is released quickly. Invoices can act as security or guarantee for a loan, or can be sold in advance to a third party who will subsequently take the payment off the clients.
Technology is disrupting traditional financing rapidly, and we spoke to Paul Crayston from MarketInvoice about how his platform has already lent over £375m to UK businesses.
What are the main challenges/issues facing SMEs in relation to finance and funding?
In some ways there are deceptively few challenges in getting funding for most businesses these days. The biggest problem most businesses have is that they automatically look first (and sometimes only) to their bank. Bank finance products for businesses are usually over-priced, over-complicated and not readily offered. The good news is that recent years have seen a huge proliferation of new business finance products. By looking beyond the banks a business will find better options for their business.
Watch their Webinar on Alternative Finance
How has MarketInvoice helped SMEs access trade finance?
Trade finance is a broad term and its getting broader. In essence trade finance enables businesses to access finance against their ordinary business activity instead of having to mortgage their property and other physical assets. With the UK economy increasingly service-based, trade finance helps the ever increasing number of businesses (graphic designers, recruitment agencies, software developers) that sell only time and talent and have little or no tangible assets.
What is invoice financing in terms of MarketInvoice?
We enable business to sell outstanding individual invoices direct to investors to free up funds up front, rather than waiting up to three months for payment. We use a peer-to-peer model to give businesses the best price possible. Since launch in 2011 more than £375m of invoices have been traded on our platform, with £220m coming last year alone.
That’s why the UK Government – through the British Business Bank – is using MarketInvoice to channel funds to high growth UK businesses – they’ve lent more than £50m over our platform.
We’re growing rapidly and expect to lend well over £300m this year. That’s why the UK Government – through the British Business Bank – is using MarketInvoice to channel funds to high growth UK businesses – they’ve lent more than £50m over our platform.
Tell us about your peer-to-peer lending platform
MarketInvoice has an entirely unique product. No other finance provider offers an equivalent product.
The key advantages are:
- Price – we are significantly cheaper than traditional invoice finance because we have no hidden fees. A bank charges 6.4p for every £1 of invoice finance, we charge 2.8p.
- Flexibility – with MarketInvoice businesses can use us once (for one invoice) and never again. This puts the business in control, they’re not tied to long contracts restricting what they do in the future.
- Speed – getting finance from a bank usually takes more than a month, we take a business from application to draw down of funds in just 24 hours. Businesses in the modern day move way too quickly to wait around for weeks on end, we eliminate that problem.
- Volume of funds – typically in invoice finance, businesses receive only 40-60% of their invoice face value as up front finance, Marketinvoice offers typically between 70-90%.
Invoice Finance Guide
We’ve put together lots more information on invoice factoring and invoice discounting.
- 8 challenges within the commodities market
- A guide to managing cash flow
- A Q&A with Roman Itskovich at Ebury
- Interview: Tackling Money Laundering in Trade Finance
- Barclays have culled their export finance team – where is the trade finance market headed?
- Bitter-sweet: Cocoa’s volatile relationship with price
- BREAKING: UK Economy Grows Slowly at 0.3%
- Brexit and the future of Fintech’s: our view at TFG
- Expert View: Enrico Camerinelli on Trade and Supply Chain Finance
- Export Factoring