Struggling with cash flow – Exploring the growing use of asset and invoice financing

There was a time when SMEs relied on their main bank for all of their finance options.

Recent economic pressures are leading to more cash flow challenges for SMEs and the old approach may no longer be sufficient.

Greater financial awareness is causing more SMEs to explore asset and invoice financing, with search enquiries for the terms rising by 26 per cent and 19 per cent respectively.

These options must be well understood to be used effectively.


What are asset and invoice financing?


Asset and invoice financing allow SMEs to enhance working capital by utilising existing assets rather than relying on traditional bank loans.

Asset financing will see a loan secured against tangible assets like equipment, property or stock.

Invoice financing allows a business to secure a loan based on the money it is due to receive from clients or customers before it has been paid.


What are the benefits of asset and invoice financing?


Given their increase in popularity, many SMEs have discovered a distinct benefit to asset and invoice financing that sets them apart from traditional bank loans.

Both are seen as effective ways of unlocking additional working capital, given that they are generally faster to approve than other financing options.

This is due to them being based on the current, upcoming and potential profitability of a business rather than just its existing financial state.

For businesses struggling to maintain cash flow through standard business practices or traditional financing, the swift injection of funds can be useful for investing in growth or clearing liabilities.


How can SMEs manage the risks of asset and invoice financing?



The flexibility that gives these options merit also carries a significant risk.

If the financing is not properly managed, repayments can be due before the invoices are paid in full, or the assets valued for the finance may need to be sold to pay them off.

Both of these instances significantly weaken the position of a business and may see it face financial difficulty.

No financing option is truly without risk, so seeking professional support is vital.

Our team can help you understand the right financing for your business and support you with the forecasting and budgeting required to fulfil your obligations.

Get in touch with our team for help in maintaining your cash flow. 

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