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January 27, 2022updated 07 Apr 2022 3:26pm

What next for invoice finance in the UK?

Receivables finance outlook for 2022

2022 is set to be a transformative year for businesses with many anticipating a year of growth – and if the last 18 months have taught SMEs anything, it’s that finance is the key to making that happen, writes Phil Chesham, head of invoice finance for Time Finance. Here Chesham explores the key trends for businesses and what’s next for the invoice finance market in 2022.

Momentum in the market and demand for finance remains high among UK businesses and we don’t see this slowing down any time soon. Invoice Finance continues to be a popular funding solution opted for by business owners as it provides them with a flexible level of finance that will grow alongside their business. By releasing up to 90% of the value of their unpaid invoices within 24 hours, SME owners have the financial freedom to invest back into their business and enjoy growth.

Gearing up for a ‘new normal’

As the dust begins to settle on 2021, business owners are looking optimistically to the year ahead. A “new normal” is predicted to be on the cards in the not-too-distant future and will see the return of a more stable economy. So, what does this mean for the way businesses operate? Well, what we anticipate is a greater emphasis on cashflow forecasting and budgeting for the coming months. An air of cautious optimism remains, but a hunger for positive change reigns.

Return of insolvencies

Over the last 18 months, thousands of businesses have been helped by Government support initiatives. So much so that the Insolvency Service statistics for Q4 showed that the total number of company insolvencies dropped to their lowest annual level in 2020 since 1989. With the final raft of support measures nearing their end and repayments now due, so-called “zombie firms” who continue to walk among us but will inevitably fold, will no longer be propped up by this additional support. It will also be a challenging period for viable firms, and so recognising which businesses have a strong future ahead of them is key. Invoice Finance partners will play an essential role in ensuring those viable businesses make it out the other side and thrive.

Rising interest rates

The news of an increase in interest rates in December was no doubt concerning for those who have relied on short-term bank funding to bolster their businesses. With interests rates likely to rise again throughout 2022, what this creates for many is a situation where more is paid back in interest than the loan or funding line itself. Changes of this nature further amplify the importance of cashflow forecasting and building in headroom to cover eventualities such as the rise in the cost of borrowing. The good news is that there are plenty of affordable lending options out there, and Invoice Finance is one of them that typically charges lower rates of interest than banks. So, with rising interest rates likely to act as a major hurdle for businesses in 2022, a greater emphasis on researching the funding options out there and how the costs compare will no doubt be at the forefront of business owners’ minds this year. We anticipate Invoice Finance will be at the top of that list.

Sustainable investments

Our impact on the environment dominated the headlines following COP26 and the pressure is on British businesses to act now. Many are looking at more sustainable practices such as buying recycled resources and equipment, reducing travel or using more eco-friendly forms, switching up their supply chain to team up with more sustainable partners, and carbon-zero production targets.

Our latest research with our own invoice finance clients only confirms this, revealing that four in five business owners don’t have the systems in place to monitor their impact on the environment and 45% are planning to invest in these systems, and/or new operations, equipment or practices in the next six months to tackle this. Invoice finance is a fantastic tool for releasing additional working capital that would otherwise be tied up in unpaid invoices from customers. It enables business owners to focus on the important things on their agenda such as their corporate social responsibility and investing for the future.

Maloney joins Time Finance as invoice finance BDM

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