Banks’ invoice finance products get frosty reception

Clifton Asset Management, a financial services firm recently conducted a survey about the high street banks to UK small businesses and found that some 90% of those targeted believe the banks increased activity in the invoice finance sector is driven by the banks’ profit targets rather than the needs of their customers

Banks have never strongly promoted invoice finance products before, known as factoring and invoice discounting, to small companies, but in recent months there has been a marked surge in promotional activity. Total advances in the invoice finance sector at the end of last year stood at some £14bn, and 2010 and 2011 are poised to yield yet more growth on this figure.

Banks are promoting invoice finance aggressively in a bid to improve their security and many small businesses have raised issues in the press, where the banks have forced invoice finance on to their customers to reduce overdrafts, and then remove the overdraft facility. It’s been a case like it or lump it.

Clifton Asset Management surveyed 1,000 small businesses, and around 390 said they were in regular contact with their bank but tellingly, 60 per cent of this group that had recent contact with their bank had said they were offered them invoice financing.

Whilst the banks have increased their marketing activity, much of the press and industry comments we have been privy too suggests that many UK small businesses are fed up with the banks and are turning away from the banks for services over and above day to day banking facilities.

There is an undercurrent of disappointment and abandonment in that the taxpayers bailed out the banks, but wouldn’t renew overdrafts or even offer them to profitable businesses, and those that arte offered them are effectively priced out the market with rates some 10-12 points above the unprecedented low base rate of 0.5%.

And you have to agree with many that the banks turned away customers, and ignored their needs (commercial and personal), and despite assurance to Parliament, didn’t pass on anywhere near the level of the bailout funds from the taxpayer that they promised?

So then, is it any wonder that for many, the banks are now last on the list of companies they would do further business with? When you also start factoring in that there are (like Factoring Finance Ltd) a host of independent invoice finance brokers, around the UK, who haven’t abandoned you in the past, care about their customers needs and above all else, can source the best deal for you, and not their own profit margin, its not wonder the banks have to threaten small business from calling in loans and overdrafts to sell their branded invoice finance services.


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