For many businesses considering funding, banks are the first port of call. But there are signs that SMEs are beginning to shun the banks and look towards lesser-known alternatives, such as invoice factoring and discounting. According to figures released by The Asset Based Finance Association (ABFA), debt secured against the debtors book (mostly invoice factoring and discounting) has grown at an astonishing rate of 11% over 2010, and some sub-sectors have done even better: for example, export finance had a year on year growth of 50% in Q1of 2011. Indeed, the rate of growth has been so significant that in 2010 the four largest factoring markets in the EU (UK, France, Italy and Germany), served more than 100,000 clients, most of whom were SMEs.
Invoice factoring and discounting is perhaps particularly appealing to businesses because it solves the age old problem of invoice settlement cash-flow issues – something which figures from the Federation of Small Businesses (FSB) shows can be a slow process. As such, it allows companies to make the most of their revenue without incurring a great deal of risk as a result of their borrowing. And with these types of funding available for everything from single invoices to the whole debtors book, it can be an incredibly flexible finance option for SMEs.
Of course, some companies will still prefer the familiarity of loans and others will stick to the traditional equity route. But even with regards to equity funding, companies are exploring new options, such as crowd funding. Only last week, the equity-based crowd-funding website Crowdcube announced its first successful fund-raising of £75k. So, if you’re feeling despondent about your ability to secure a loan or watching Dragons’ Den puts you off pitching to investors then why not take a look at the other options available to you? You might be surprised at how many alternatives are available!