An alternative form of lending to businesses is on the rise
By Robert Clare, NatWest Regional Director for Sussex and Surrey & South West London.
As the UK economy recovers and business confidence returns, I am definitely seeing an increase in business investment and requests for appropriate funding. In the first half of 2014 I have seen good growth in net lending from NatWest to SMEs across Sussex and I hope that this is replicated at the other banks.
Economic recovery does though bring its own risks and it is a well told tale that more businesses fail coming out of recession than in it. A key risk is ‘overtrading’ driven by a desire to grow the order book quickly without recognising the impact on working capital which can become constrained depending on the working capital cycle of a business. Appropriate working capital funding can be a good answer and during my time in banking the prominence and flexibility of receivables or invoice finance has changed dramatically.
With the UK economic recovery continuing, now seems a good time to look at invoice finance in a little more detail. The “great recession” may almost be over according to The National Institute of Economic and Social Research (NIESR), with the economy on the verge of resuming its pre-crisis power. However, recent research undertaken by RBS Invoice Finance reveals that many UK firms are still struggling with late payment and cash flow management.
The findings show that 68% of those surveyed were seeking payment within 44 days but, in reality, only 34% are actually getting paid within this timescale. Such results suggest that there still remains a large gap between contracted terms and real payment time. Even if payment terms are extended to within 60 days, there are still 13% that push payment beyond those terms.
Having access to sufficient working capital is vital for companies operating in a recovering economy. It can have a significant effect on an organisation’s success; providing the liquidity needed to grow, adapt and make acquisitions or to simply help to manage day-to-day trading requirements.
