Use of import factoring
and export invoice discounting suggests overseas sales are an
important factor in business recovery, writes Evette Orams,
managing director of Hilton-Baird Financial
Solutions.
Go deeper with GlobalData
Renewed concerns
about the state of the UK economy were sparked by the Office for
National Statistics’ shock announcement of a 0.6% contraction
during the final quarter of 2010.
However, the Asset Based
Finance Association’s (ABFA) latest figures show that targeted cash
flow support is delivering real benefits to businesses.
Asset based finance clients
experienced sharp increases during 2010, including a 12% rise to
£56.2bn (€64.5bn) in the final quarter of the year.
This is particularly
significant when considering the raft of cash flow pressures that
UK businesses have faced in that time and suggests that, by
releasing capital against the value of a range of business assets,
firms are better equipped to combat challenges and seize new
business opportunities.
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By GlobalData
The statistics
also suggest that international opportunities are growing, with
businesses using import factoring recording 43% sales growth, the
largest year-on-year increase. This was closely followed by export
invoice discounting client sales, up 39%.
Sales increases were also
noted in businesses using domestic factoring, up 6%; and in invoice
discounting, up 11%.
Recent research by Bacs
Payment Services revealed that more than £24bn is owed in
outstanding payments to SMEs at any time, so it is encouraging to
hear that uptake of debtor protection is rising. ABFA figures show
a 23% increase in client sales for non-recourse asset based finance
facilities, which incorporate debtor protection.
An additional benefit for
invoice finance clients is that their customers appear to pay them
more quickly, demonstrating the benefits of having an external
dedicated and expert credit control resource provided by a
factoring company.
Indeed, factoring clients’
Days Sales Outstanding (DSO) improved by 1.8 days from 59.2 to 57.4
days in the 12 months between the final quarter of 2009 and the
final quarter of 2010.
These results are a reminder
that flexible and affordable cash flow solutions are available.
Client sales have risen in six of the last seven quarters, while
the annualised data for 2010 revealed an 11% increase in client
turnover to £212.2bn. This indicates that, as far as invoice
finance clients are concerned, finances are heading in the right
direction.
This is despite the news that
lending under the Enterprise Finance Guarantee scheme fell by a
further 31% in the fourth quarter of 2010. UK banks released only
£99m in the final three months of 2010 under the scheme the lowest
figure since the initiative was introduced.
Conversely, advances made by
the ABFA’s members to clients rose by 8% to £14.9bn between the
final quarter of 2009 and the final quarter of 2010. Of this
figure, advances against debt in pure invoice finance facilities
increased by 9% annually.
Meanwhile, advances against plant and machinery rose 88%,
and stock 21%, demonstrating that funding remains available against
a range of business assets, depending on a business’ individual
requirements and circumstances.
