New factoring statistics show flat market for the SME sector

The ABFA released statistics for factoring and invoice discounting in the first quarter of 2014 last week accompanied by a press release claiming that it had been a “record year for asset based finance as businesses step up borrowing against invoices to fund growth” and “Invoice finance shows 29 per cent growth since 2009/10”

Whilst I’m sure these statistics are accurate they are not a reflection of the factoring industry as relating to the SME sector because as usual the figures and resultant statistics are heavily skewed by the inclusion of companies with sales in excess of £50m per annum.

More pertinent statistics relating to the SME sector of companies with annual sales up to £10m per annum show that the net number of companies using factoring and invoice discounting in 2013 rose from 39,292 to 39,402 a magnificent net increase of just 110 companies.

Moreover the advances to these companies at the end of 2013 were also at a similar level to the end of 2012.

The biggest growth area in terms of advances seems to have been to companies with annual sales in excess of £50m with the 713 companies falling into that sector responsible for a whopping 40% of the total advances made.

Another pertinent statistic is that the net gain of 110 companies using these facilities is made up of 9,126 new companies less 8,762 who for one reason or another ceased factoring which is considerably worse than in the preceding two years.

Client numbers for the first quarter of 2014 show the rather amazing statistic of 2,185 new clients counter balanced by exactly 2,185 lost clients.

I was rather amused by the comment made in the press release by Martin Morrin, Chairman of the ABFA, who said: “Invoice finance is playing a bigger role than ever in funding British businesses’ growth, and has truly stepped into the mainstream of business funding.”

“Since the credit crunch, invoice finance has become an even more important source for SMEs for funding as they struggled to access traditional term loans.”

For those that don’t know, Mr Morrin is the Managing Director of RBS Invoice Finance which is a subsidiary of Royal Bank of Scotland one of those very same high street banks that are proving so difficult to obtain traditional term loans from thus forcing their customers into factoring.

The ABFA press release also stated that “that many businesses do not realise that the invoices that they have outstanding with customers are often the most valuable asset owned by the business, and that banks and other funders will willingly lend against them.

Intriguingly the fact that so many companies were unaware of invoice finance was one of the topics raised at the recent ABFA conference which did make me smile as the factoring companies were chuntering about exactly the same thing forty years ago and I wouldn’t mind betting that it’s been raised and discussed many times in the intervening years.

I’ve come up with a novel suggestion – why don’t all of the factoring companies get together and fund a joint marketing effort to raise awareness of the industry and the benefits available to the SME sector.

On second thoughts it’s a silly suggestion as it’s far too radical 😀