Is Invoice Finance Overpriced?

From the previous research that we have conducted we have seen that the cost of invoice finance generally is the biggest barrier to expansion of the invoice finance market.

In our most recent survey, we asked a sample of 100 SME businesses (Small and Medium Sized Enterprises) whether they thought invoice finance generally was overpriced, underpriced or priced about right. The results were as follows:

•·         68% believe that invoice finance is overpriced.

•·         32% believe it is priced about right.

•·         None of the respondents thought that it was underpriced.

Clearly these results reflect a perception that the cost of invoice finance generally is too high. Therefore, we went further and asked the SMEs that thought invoice finance was overpriced to state the amount by which they felt it was overpriced. Those that thought it was overpriced responded as follows:

•·         2% of respondents felt it was overpriced by 5%.

•·         10% of respondents felt it was overpriced by 10%.

•·         19% of respondents felt it was overpriced by 20%.

•·         46% of respondents felt it was overpriced by 25%.

•·         2% of respondents felt it was overpriced by 35%.

•·         19% of respondents felt it was overpriced by 50%.

•·         2% of respondents felt it was overpriced by 100%.

This means that on average customers think that the cost of invoice finance is c.19% too high although it is also the case that just over three quarters of the respondents are looking for a price reduction of no more than 25% in order to feel that these products are priced "about right".

This would suggest that there is an opportunity for invoice finance providers that are able to develop low cost methods of delivery in order to deliver a saving of at least 25% on the current average market pricing.