Supporting recovery with Invoice Finance
Read time: 10 mins
Stephen Hand, Managing Director, Sales, Invoice Finance & ABL, Lloyds Bank, discusses the changing Invoice Finance landscape and how Invoice Finance can support businesses through recovery.
Like most areas, Invoice Finance has undergone a shift over the past year as the UK grappled with the coronavirus pandemic.
Typically the go-to working capital product for businesses looking to accelerate cash flow, Invoice Finance has, understandably, seen demand drop off, with many businesses simply not invoicing due to closures and others benefitting from government support measures like the Coronavirus Business Interruption Loan Scheme (CBILS) and VAT deferral.
However, we have seen a steady flow of facilities being fulfilled for clients who have been able to trade normally or accelerate their activity and pivot into new areas, such as PPE production. And, we expect to see demand for Invoice Finance increase substantially as businesses take advantage of its flexibility and low-risk nature as they rebuild.
Benefits of Invoice Finance in recovery
Invoice Finance is a natural funding choice for businesses moving towards recovery due to its low risk nature and the fact it typically gives greater funding than options like an overdraft.
It's also ideally suited to start-ups - and there are sure to be a significant number of entrepreneurs looking to capitalise on the new industries that emerge post-Covid – and businesses looking to pivot into new areas. It allows businesses to take on contracts that they wouldn’t otherwise be able to fulfil, as there’s no need for property to act as security – it's the debtor book that secures the funding.
It’s also an incredibly dynamic product – it grows with businesses, meaning they don’t have to worry about how they’re going to fund their next invoice, they just have to assess whether they want to work with a particular customer. For an extra layer of protection, we offer clients the option of adding Debtor Protection to their facility which enables us to check the health of any potential customer and come back to them with a risk-based recommendation.
It gives clients certainty not only of the funding, but also that if one of their customers was unable to pay, they’d still receive 90% of the money owed to them, which could be the difference between whether they’re able to continue trading or not.
The flexibility businesses need
The flexibility of our Invoice Finance product set means we are ideally positioned to help businesses find the right solution for their current needs, and adapt their facility as they grow.
As well as offering a full book facility for both factoring and invoice discounting, we recently launched Invoice Finance Manager (IFM), which fills a gap we identified for funding single invoices. Developed in partnership with Satago, IFM offers a solution for businesses with one or two clients on longer payment terms, which is having an impact on their cash flow. IFM allows them to pick and choose which invoices are included in the facility via an easy-to-use portal.
It also comes with the added benefits of online credit control and risk insight tools to help businesses save time and reduce the risk of late payment. And as these businesses grow, they can add more invoices and eventually shift to a full product if it’s more cost effective for them.
This addition to our portfolio means we are well placed to deliver for businesses at all levels and help them through the coming months.