Cash Flow Financing Enquiries on the Rise in the UK

An increasing number of companies are turning to cash flow financing as a way to fund projects and continue operating during challenging financial periods. In 2017, more than half of all small businesses in the UK had to turn down at least one order or contract due to not having the funds needed to deliver. Due to heightened interest in alternative borrowing types, many business owners are only recently discovering cashflow financing as a viable option for accommodating expansion in an expeditious and unhindered manner.

Decreasing Delays with Direct Debit Services

The trend towards cashflow financing has coincided with an increased demand for direct debit services like AccessPay. These Software-as-a-Service (SaaS) platforms make it easy for any business to collect direct debit payments on a same-day basis. Such banking functionality equips the company with the ability to collect funds and reinvest almost in real-time, which is a major advantage when compared to the conventional approach of waiting days for transfers to post. You can also find SaaS platforms for invoice, contract, supplier and vendor management to get an overall view of your business outgoings and incomings.

By drastically shortening funds transfer times, companies are able to speed up the inflow of capital and subsequently increase usable cash flow. Savvy entrepreneurs are using direct debits in combination with cashflow financing to maximise account balances and maintain the monetary leverage needed to ensure unrestricted continuity. Ultimately, direct debit services complement cashflow financing by giving you fast access to profits and routinely fattening your accounts to ensure you always have sufficient funding to tackle large orders and contracts.

Invoice Financing is Helping More Business Get Paid in Advance

The most commonly used type of cash flow financing is invoice financing, which allows you to borrow the amount of a scheduled invoice before the client pays. During the past two years, there’s been a significant increase in the number of companies that are using this method to get paid in advance. The speed and ease of approval for these loans make them an enticing option for companies that are urgently searching for much-needed funding solutions to cover a costly yet potentially lucrative project.

Of course, the trade-off is that you’ll incur a nominal loss on the invoice payment when you deduct the interest charged on the loan. However, the ability to accommodate a lucrative job in a timely manner can more than compensate for the small profit percentage allocated towards interest, in exchange for the benefit of receiving the funds upfront.

Cashflow Financing More Common During Certain Seasons

Lending figures from 2017 suggest that cashflow financing has a seasonal demand pattern in the UK, with enquiries at their highest during May-August and June being the biggest month of the year for invoice financing. This trend may be due to pleasant summer weather facilitating an increase in large construction projects and other working arrangements.

Recruitment agencies are the biggest users of cash flow financing, accounting for more than 50% of the sector’s borrowing during July and September. Likewise, July is a busy time for logistics & transport companies, as cash flow may slow down for these companies with fewer clients investing in transport or logistical work during the hottest time of the year.

Companies that provide business-to-business (B2B) services represented about 30% of the cash flow financing enquiries submitted in May of 2017, indicating that SMEs in the B2B space are unsurprisingly the savviest – getting in on the borrowing before companies gear up to invest and improve during busier summer months.

How Common Can Cashflow Financing Become?

Data suggests that the invoice financing industry will experience a 20% growth within the next year alone. Some analysts estimate that up to 80% of companies could be using some form of cash flow financing by 2025. When you consider how useful this financing method is for expediting access to incoming revenue, it’s reasonable to assume that it could become the norm within a decade.

Another factor that continues to boost the popularity of business lending, in general, is the ongoing trend towards credit improvement in developed countries. In other words, five years from now, most people who have bad credit today won’t have bad credit anymore. Plus, there are currently more people fixing their credit than ruining it, thanks in part to the convenience of online credit monitoring and improvement hubs. With those factors in mind, it’s easy to understand why all forms of business financing have seen a steady increase in recent years.