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• 15 Jun

  Invoice Finance, Factoring and Invoice Discounting Market Research Conclusions

  Below is a summary list of the key invoice finance market research findings and conclusions following publication of our latest comprehensive invoice finance market research report which includes factoring, invoice finance & invoice discounting related market research findings.

  These are the additional findings from just this latest research report:

  1. Invoice Finance Qualification Is Not Understood - Customers do notunderstand the qualification criteria for invoice finance and how they compare with overdraft criteria. They also do not understand the different criteria between invoice finance products.
  2. Businesses Don?t Realise Invoice Is Freely Available - Very few businesses seem to understand why invoice finance may be more freely available than overdraft.
     
     
  3. Tariff Based Charges Are Preferred - 74% prefer a tariff of charges over a single fixed fee system despite these systems having gained popularity within the industry in recent years.
     
     
  4. There Is Demand For Construction Finance - The majority of construction businesses raise applications for payment and say they would benefit from immediate funding against them. However only 2% said they used an invoice finance/applications finance product.
     
     
  5. Construction Finance Awareness Is Very Low - 65% of construction sector businesses need to raise finance although only 19% have had construction finance quotations. The key reason for not using invoice finance/applications finance is not having heard of it.
     
     
  6. Construction Finance Pricing Is An Issue - The key reason for not going ahead with an invoice finance/applications finance quote in the construction sector was price.
     
     
  7. Businesses Expect To Grow This Year - The average growth projection was 14.6% over the next 12 months.
     
     
  8. A Lack Of Access To Funding Is Curtailing Growth - Businesses stated that they needed between £5,000 and £250,000 of additional funding in order to exceed the growth projections that they gave.

  These were the findings and conclusions from the previous two reports:

  1. Invoice Finance Has Growth Potential - the invoice finance industry has the potential to grow if the profiles of these products and providers were raised with potential customers.
     
     
  2. Invoice Financing Costs Are High But Also Misunderstood - cost is clearly a key issue inhibiting the expansion of the invoice finance market. However to some degree prospective customers may also be over estimating the cost of invoice finance. Promotion of more transparent costing would help.
     
     
  3. Product & Brand Awareness Is Low - greater awareness of the benefits of invoice finance, and of the businesses providing these services, would lead to a greater uptake of invoice finance.
     
     
  4. Invoice Finance Can Have Funding Advantages Over Overdraft - clearly overdraft is currently used far more widely than invoice finance. However, the levels of funding raised through invoice finance, as a percentage of outstanding debtors, can be significantly higher than that available via overdraft. Overdrafts also appear to have been reduced or removed in some cases.
     
     
  5. Customers Want More Flexible, Unrestricted Funding - with the exception of cost, funding restrictions were the top issues for potential customers. They also wanted more flexibility around the provision of funding.
     
     
  6. Customers Want Instant Online Setup And Approval - the second most requested improvement to invoice finance generally was the requirement for facilities to be able to be approved instantly via the internet.
     
     
  7. Product Awareness Is Low - customers did not appear to understand the full range of invoice finance products that are currently on the market. Several of these existing products already addressed requirements that they raised during the research.
     
     
  8. Customers Think Invoice Finance Is Overpriced - by an average of c.19% and a 25% price reduction would satisfy some 75% of potential customers.
     
     
  9. Banks And Accountants Are Key To Invoice Finance Growth - potential customers saw promotion of invoice finance via banks and accountants as the key. They also advocated more general industry marketing and felt that government support for invoice finance would also play a role in growing the market.

  By Glenn Blackman