Why Invoice Financing is not Extremely Popular

On the surface, it would appear as if invoice financing would be extremely popular with UK businesses. After all, it enables them to receive a large chunk of their invoice immediately while only being forced to pay a relatively small amount of money to a provider for this service. It helps improve cash flow which can in turn help expand the business. However, the Asset Based Finance Association says that less than 1% of UK companies actually utilise invoice financing. This is an intriguing statistic so we asked 100 small and medium sized businesses why this is the case. They gave four main reasons for lack of popularity of invoice financing and we explore these below.


This was the biggest concern as over 40% of the companies interviewed stated that the costs associated with invoice financing was off-putting. This is a remarkable statistic because there are various online calculators available which clearly show that invoice factoring (one of the two main types of invoice financing) can help save businesses save more money in the long run than any fees which would be incurred. With invoice factoring, a provider takes care of credit control which is one less overhead of a company. Also, invoice financing gives companies ready cash which can then be used to purchase goods in bulk at a discount price.

Lack of Promotion

Almost one third of businesses interviewed suggested that the invoice financing industry simply doesn’t promote their products enough. There is a distinct lack of information and understanding about the process of invoice financing and as a result, a huge number of businesses don’t even know such an offer exists.

Prefer Loans and Overdrafts

Around one fifth of businesses stated that getting bank loans and overdrafts was easier. Again, this only serves to highlight the lack of information available about invoice financing. Running invoice financing facilities requires very little work. Thanks to technological advances, it is now possible to upload invoices electronically from the sales ledger package of a company. The company can even have cash transferred to their account immediately as and when it becomes available. This ensures that they don’t have to be requesting money constantly.

Therefore, loans and overdrafts are not easier to use. Unlike overdrafts and loans, invoice financing grows in line with a company’s turnover. Invoice financing will raise far more funds than virtually any overdraft or loan. You can only benefit from loans and overdrafts if your business is known to be profitable whereas companies that make a loss can still use invoice financing.

Poor Reputation

Around 10% of businesses interviewed believe that invoice financing will give them a bad name if other companies became aware of it. However, their reputation is likely to improve because of improved cash flow and besides, it is possible to benefit from invoice financing confidentially.

It is obvious that UK businesses are still unaware of what invoice financing can do for them. This level of misunderstanding is the main reason why so few companies utilize this form of funding. Do your research and perhaps it will become clear that invoice financing is the way forward for any progressive organisation.

We can offer you financial solutions to help keep your cashflow healthy. Request a quote now to find out how much invoice finance can save you.

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