Ross McFarlane, commercial director of invoice finance at Aldermore Bank, says it’s time to change the conversation on alternative funding
Cash is the lifeblood of any business. We all know it, but you can never overstate the fact that without it, businesses’ ambitions and growth aspirations can quickly become frustrated. More seriously, if your cash remains tied up in unpaid invoices, then ultimately your business may not survive.
Add to this the fact that traditional high street bank lending to small and medium-sized enterprises (SMEs) has become restricted in recent years, you can understand why many businesses now see invoice finance as a valuable alternative source of finance to support their growth aspirations.
The sad truth, which we highlighted in our recent Future Attitudes report, is that almost a quarter of SMEs miss out on business opportunities due to lack of funding.
And that comes at a cost to the average SME of nearly £80,0001 of new business opportunities lost while mid-sized firms – those with between 50 and 249 staff – are the worst hit with 42 per cent reporting how they have been significantly impacted by not having access to the funding they need.
In fact, in cash terms it equates to an average impact of £110,9602 of new business opportunities lost over the last year for those companies, but the true cost is in the lost opportunities for jobs, new products and services, and wealth creation to the UK economy.
At Aldermore, we recognise these funding challenges and we want to change the conversation and focus on how invoice finance can play a crucial role in enabling businesses to grow.
Fast access to funding
What if we could help these companies gain a fast track access to finance?
Ambitious businesses looking to secure larger contracts with bigger firms are understandably wary of the larger capital outlay they may need just to service those contracts.
Add into the mix that they may have no choice but to agree to payment terms of 60 or 90 days and you can see a business owner’s ambitions may well be frustrated before they have even closed the deal.
We see invoice finance as a practical way of enabling businesses to embrace new opportunities as they happen.
The facility can be tailored to meet the particular requirements of the business, allowing it to unlock the cash tied up in unpaid invoices to release funding for progression or growth. Typically, we can provide access of up to 90 per cent of unpaid invoices straightaway.
Take a typical UK haulage firm as an example. Its standard payment terms for customers may well be 30 days net although many customers will insist on 60 days. Added to that wage costs and overheads, such as fuel and rent, and the owners may need to spend more than £100,000 before they see the first payments coming in.
Simply making those payments on time can be an enormous strain on day-to-day cash flow. With invoice finance you could see funds released to your business on the same day you present your invoice.
Not only that, it can give you the confidence to take on those bigger contracts and more importantly focus on growing your business.
That’s exactly the kind of ambitious forward-thinking we’re looking to support. In fact, rather than something to keep quiet about, we’d like more businesses to take advantage of what is an extremely effective form of finance, one that provides companies with access to money against the value of their invoices before they’ve been paid.
This is reflective of our Future Attitudes report, which revealed that too many growth opportunities are being missed due to lack of funding.
How we can help
At Aldermore, we want to help you propel your company forward by providing the right funding facility and business support you need to help achieve your goals and ambitions.
By understanding our client’s business plans, we can provide a bespoke facility which enables them to spread these major costs over a number of weeks. From finding the right solution to helping understand the opportunities and hurdles ahead, we will provide tailored advice and expert insight every step of the way, along with a facility that can evolve as your business does.
Our expert and dedicated relationship managers will discuss your aspirations and provide you the necessary support and funding you need to ensure your business continues to operate smoothly.
Invoice finance is increasingly seen as an important part of that funding mix for many SMEs and a flexible solution to secure growth.
We are seeing this sea change every day from clients that no longer view invoice finance as a taboo topic, or as a negative sign that a business has cash-flow troubles, but instead they are waking up to its possibilities as a flexible solution to secure growth.
Perhaps you have seen it, too?
Find out more about invoice finance and our complete business finance solutions that could help take your business to the next level at www.aldermore.co.uk/businessfinance or call us on 0330 127 2252
1 & 2 Research conducted by Opinium Research between February 20 and 26, 2018 with a nationally representative sample size of 1,004 senior decision-makers in SMEs