Finding new markets among the many thousands of UK businesses that could benefit from financing their receivables will distinguish industry leaders from laggards, says Martyn Price, regional director south, invoice finance at Metro Bank.
Invoice finance is a fantastic tool for supporting businesses’ cash flow. It unlocks cash, providing access to funds that can enable SMEs to survive and also thrive. It provides greater flexibility than other forms of bank lending, greater levels of funding and despite perceptions otherwise, the cost is competitive.
So why do fewer than 40,000 businesses in the UK use it? Those of us that live and breathe invoice finance know how great it is, and it’s fair to say we all want to grow the market by introducing new businesses, as opposed to recycling each other’s customers periodically. This drives prices down which in turn impacts the service.
First and foremost, invoice finance is a relationship-based product. Even the most hands-off customers still need open lines of communication with their funder, as this builds trust, which is a key part of any relationship, especially an invoice finance relationship.
Martyn Price of Metro Bank
Just because we see our product as relationship-based, do customers view it that way and how important is that to them anyway?
The last 18 months have provided us with a very clear message; if there are cheaper and easier ways to fund their businesses, SMEs will take it. Granted, the Government support available during the pandemic is likely to be a once in a lifetime option, but it should be a warning not to rest on our laurels.
Another major shift as a direct result of Covid is the ability to operate and run invoice finance businesses remotely. At Metro Bank and elsewhere, meetings continued to take place via video call, documents were signed, funds were transferred and credit control was completed.
We all prefer the traditional methods but is that just a mindset we need to forget? Rather than trying to find ways to get back to what we did, should we not find ways to embrace the opportunity that has inadvertently been thrust upon us?
One could make a case for our industry being too inwardly focused. Furthermore, there is a danger of us becoming the dinosaurs of the funding world, the latest version of the video rental store desperately clinging onto physical rentals in a streaming world.
The reality is that we haven’t seen any major technology shifts in the last 10-15 years within the market, and whilst there are some ‘fintech’ adaptations of what we do, the majority of funders are still running a relatively similar operation.
We need to adapt and recognise that just because we like to make decisions based on “seeing the whites of people’s eyes”, this is not always going to be viable. Most lending is now available at the click of a button and at some point invoice finance will be as well. Yes, there will be occasional fraud because of this and some funders will lose money, but we’ll find ways to combat this and reduce the risk in the same way that we do now.
Finding new markets for invoice finance
As the old saying goes, without change there can be no progress, and progress in our industry has to be growth. We absolutely must open our market to the many more thousands of businesses out there that could benefit from the great solution we provide, but presently don’t.
For the avoidance of doubt, I love meeting business owners face to face and understanding their business and needs. It’s one of the best things about what we do, but just because I enjoy it doesn’t mean it’s the best way to attract customers.
We need to make invoice finance an easy product to understand, easy to buy and easy to use. The onus is on us and our industry to make it simple and easy; in short, we’ve got to create progress ourselves.