What Customers Don't Like About Invoice Finance
Pure invoice finance funding, by Asset Based Financing Association members, exceeded £12.6 billion at the end of last year. Therefore, invoice finance is clearly fulfilling the funding needs of a large number of UK businesses.
In order to better tailor our products to meet customer needs, and hence grow the market further, it is helpful to consider business' perceptions of the shortcomings of invoice finance at present.
The research that we have conducted in the past identified that a significant proportion of businesses feel that "cost" is the greatest barrier to increasing the uptake of invoice finance. However, to better understand the other short comings of existing invoice finance offerings, we asked a sample of 100 SME businesses (Small and Medium Sized Enterprises) to put aside cost as an issue and tell us what other aspects of invoice finance arrangements they didn't like.
The results were as follows:
- Funding limits 20%
- Audits 18%
- Unapproved invoices 17%
- Paperwork 13%
- Personal guarantees 12%
- Electronic payments taking 5 days 7%
- Upsetting some customers 5%
- Time from invoicing to receiving funds 3%
- Credit limits 3%
- Lack of communication 2%
Funding limits and unapproved invoices, when combined accounted for 37% of the responses. These both relate to additional funding controls over and above the initial payment percentage used to determine the level of funding. These types of restrictions are commonly applied across invoice finance industry and are considered by many to be the cornerstones of controlling risk. However, the fact remains that these items were highlighted as "pet hates" by a significant proportion of businesses.
What is also interesting is that there are several items within this list that can be addressed by products that are already on the market, but perhaps are not well known. For example, "paperwork" was mentioned by 13% of the respondents and there are products which already operate in a paperless fashion. Furthermore, there are providers who are prepared to provide funding without personal guarantees in some situations. Often these niche products may not be obvious to newcomers to the market.
In summary, within a market that is clearly already providing significant funding to UK businesses, the above list sets out a number of items that could help some funders make their product offerings even more attractive to prospective customers.
