Need for business finance to rise in 2018

By Andy Dodd, managing director

In 2017, almost half of all small to medium UK enterprises turned down a contract or order because they couldn’t deliver the work due to a lack of available finance – a trend that is expected to continue in 2018.

According to our funding line data, the demand for invoice finance is expected to grow by 21% this year in comparison with 2017. The total credit lent to businesses by the company in 2017 was £893m, contrasting a predicted £1,080,530,000 this year.

Cashflow trends from 2017 also shows how lending figures were eminent throughout spring and summer, with SMEs most likely to seek invoice finance between May and August.

Overall enquiries for cashflow finance also increased significantly in June, suggesting seasonal demand. Staff holidays and overall reduced business hours have a consequential impact on the demand for such funding.

Our new ‘Cashflow Calendar’ reflects on financial changes from 2017 that may still impact a business, as well as key dates and financial events throughout 2018 that could influence a business’s cashflow and help them better manage resources and funds.

A couple of examples from the calendar include how the EU summer break should be considered when meeting client demand, Brexit negotiations and top trade shows that could help secure new business.

A key takeaway from 2017 included in the calendar is how in November the official bank rate increased for the first time since July 2007, from 0.25% to 0.5%, leaving some business owners questioning if this will have an impact when borrowing from third party lenders.

While the Bank of England base rate has risen, it’s still historically very low and not anticipated to rise substantially in the short or medium term. A sound business will match its method of borrowing to the asset being financed and on which the debt is secured. This means cashflow finance represents some of the lowest interest rates and most flexible methods of finance, which rises and falls with fluctuations in turnover.

Therefore, if the business has sound profit margins, the cost of interest will behave like a variable cost, moving in line with turnover. Crucially, a good cashflow finance provider will ensure that the collection of debtor invoices is efficiently and professionally carried out to minimise the amount that needs to be borrowed, mitigating future interest rate rises.

To download the useful guide, click here.