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How invoice finance helps exporters

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The weakness of the pound since the EU referendum has been a boon to exporters, and many are looking to unlock working capital so they can scale up to grasp the opportunities.

The latest data from UK Finance shows that, in the second quarter of 2017, total sales by businesses funding their export activity using invoice finance – factoring and invoice discounting – stood at £7.7bn.

That represents a 36% increase on the same period last year, and the running total for the year to date is up 38% at £14.9bn.

Underpinning those sales, the amount of funding advanced to UK clients grew by 13% year-on-year and stood at £21.8bn at the end of June.

Many of these businesses are SMEs. Nearly half of the businesses supported by asset-based finance have an annual turnover under £1m.

The industry was providing £1.3bn in finance to these businesses at the close of the second quarter, an average of £68,500 each.

So how does it work?

There are two basic types of asset-based finance.

Invoice Finance: The two main types of invoice finance are factoring and invoice discounting. Both allow businesses to release the working capital tied up in their unpaid invoices.

In both the finance provider will normally purchase the client’s outstanding invoices, providing an immediate initial payment of the majority of the invoice value, with the remainder (less the financier’s fees) paid to the client on payment by the debtor.

Factoring incorporates an added service element, with the financier normally managing the credit control and collections process. This makes it particularly suitable for smaller businesses.

Asset Based Lending: An asset based lending facility will provide a broader mix of funding including revolving and amortising structures against the entire range of business assets.

Traditionally advances are available against debts, inventory, property, plant and machinery, but can be arranged against intangible assets such as brands and forward income streams.

UK Finance represents around 300 firms providing credit, banking, markets and payment-related services.

Jeff Longhurst, its Head of Commercial, Invoice Finance and Asset Based Lending, said: “The sector provides vital support to businesses of all sizes, particularly small firms and larger corporates.

“Unlocking the value tied up in unpaid invoices and other assets can be a particularly effective way to release working capital.

“It’s clear that invoice finance and asset-based lending are increasingly seen as mainstream finance options.

“Invoice financing has its roots in facilitating international trade, and as this issue becomes ever more important, it is particularly encouraging to see the turnover growth in businesses using asset based finance to export.”

Rob Johnston, Chief Executive of Cumbria Chamber of Commerce, added: “We see the growth in demand for invoice finance and asset-based lending as a positive sign. Businesses are seeking to unlock working capital so they can gear up to fulfill growing order books.”

The Chamber’s Cumbria Business Growth Hub can provide a wealth of assistance to new and existing exporters.

We offer half-day workshops, export masterclasses, a series of online video tutorials and an export documentation service, plus information on trade shows, introductions, export finance and discounted flights for exporters.

Next up is an e-Exporting Sales Workshop at The Greenhill Hotel, near Wigton, on Tuesday October 3, from 12.30pm to 3.30pm.

Presented by the Department of International Trade North West, it is aimed at businesses selling products online through multiple channels, both business-to-business and business-to-consumer.

It includes an introduction to E-Exporting; methods to internationalise your online store; identifying logistical, handling, fulfilment and returns implications; forming a structured pre-flight checklist; best practice for protecting your brand online; and aspects of digital marketing.

The workshop is free but registration is required. Places are allocated subject to eligibility criteria. For more information and to register an interest in attending contact catherynn@cumbriachamber.co.uk  or call 0845 22 600 40.

International Trade Summit

Meanwhile, the British Chambers of Commerce’s International Trade Summit takes place on October 12 at Vox Conference Centre, Birmingham.

It is designed to provide companies at all stages of their export journey with knowledge, expertise, advice and contacts to succeed overseas.

This is designed to provide businesses at all stages of the export journey with knowledge, expertise, advice and contacts to succeed overseas.

There will be a choice of informative workshops, lively panel discussions with businesses with export experience, speeches from successful exporters and, of course, plenty of time for networking.

The evening before the event, the British Chambers is hosting an International Trade Dinner bringing together more than 200 delegates from the Chamber network and wider business community.

This will be a great opportunity to make connections and gain practical advice from in-market experts to help you grow your businesses.

See the packages available on the booking page.

ERDFThe funding that supports the Growth Hub  comes from a range of sources including Cumbria Chamber of Commerce, the European Regional Development Fund, Allerdale Borough Council (Sellafield Ltd’s Allerdale SIIF, distributed by Allerdale Borough Council), Barrow Borough Council (FEDF Coastal Communities Fund Supply Chain Initiative, the Coastal Communities Fund is funded by the Government with income from the Crown Estates marine assets; it is delivered by the Big Lottery Fund on behalf of UK Government), Carlisle City Council, Eden District Council, South Lakeland District Council and Cumbria LEP. 

The Growth Hub is receiving up to £2,528,767 of funding from the England European Regional Development Fund as part of the European Structural and Investment Funds Growth Programme 2014-2020.  The Department for Communities and Local Government is the Managing Authority for European Regional Development Fund. Established by the European Union, the European Regional Development Fund helps local areas stimulate their economic development by investing in projects which will support innovation, businesses, create jobs and local community regenerations. For more information click here.

© Cumbria Chamber of Commerce

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