SKIPTON Business Finance reported a record first half with a 50 per cent increase in deals over the past six months.
Skipton believes the sharp increase is due to businesses switching to invoice finance as they can’t raise cash from the high street banks.
Invoice finance is a form of short-term borrowing that allows a business to draw money against its sales invoices before the customer has paid them.
It means that instead of having to wait 60 to 90 days before an invoice is paid, businesses can access between 80 and 90 per cent of the cash from their invoices immediately.
Customers pay Skipton a service charge and an additional fee of three per cent over the base rate for the service.
Skipton Business Finance’s sales and marketing director Andy Grantham believes invoice financing is becoming more popular as it gains respectability.
“Invoice financing is gaining credibility,” he said.
“It used to be very expensive, certainly more expensive than an overdraft.
“Previously it was the lender of last resort but now every bank has its own invoice finance business. It is funding businesses that would not get access to finance otherwise,” he added.
At a time when banks are raising their criteria for lending, invoice financing has become an alternative source of funding.
“Generally the banks are still being restrictive on who they will lend money to,” said Mr Grantham.
“More and more businesses are struggling to get an overdraft. This is another way to fund the business when the banks don’t come up with the goods.”
Skipton believes part of the reason for the 50 per cent increase in deals over the past six months is that customers feel safer doing business with a building society rather than a bank.
At a time when consumer confidence in the banking sector has dropped dramatically – the latest scandal is Barclays’ £290m fine over rate fixing allegations – customers are turning to mutuals as a safe haven.
“Customers like the fact we’re a mutual not a bank,” said Mr Grantham.
“We’re interested in where companies are going.
“We’ve got the whole building society ethos. We’re forming a partnership with our customers and the business is really taking off.”
Mr Grantham said that Skipton Business Finance shared its parent company’s mutual ethos.
“Skipton Business Finance is part of the widely-respected Skipton Building Society and we believe the fact we share our parent’s ethos has helped us build a reputation up and down the country as a flexible, friendly and respected lender,” he said.
Skipton believes it is the leading invoice finance provider and said its ability to underwrite locally and provide flexible facilities had appealed to many business owners.
Founded in 2001, Skipton Business Finance has reported growth across the country over the last 11 years and it now has offices in Skipton, Leeds, Manchester and Birmingham.
The invoice finance industry as a whole has thrived in 2012.
Its trade association, Asset Based Finance Association (ABFA), posted strong growth figures and client numbers in June.
Turnover from companies using invoice finance has grown six per cent in the second quarter, with total client sales rising to £59.2bn, up from £55.6bn last year.
Funding by ABFA’s members to businesses rose four per cent year on year, with £15.4bn outstanding in advances at the end of March.
While this figure is down 1.9 per cent on last quarter’s total advances, ABFA said the fall was expected with first quarter figures traditionally showing a slight drop and annual growth remaining positive.
Almost 42,000 companies are using invoice finance facilities in the UK as owner-managed businesses switch to the funding source as their preferred business finance solution.
“Skipton Business Finance continues to expand its operations around the country, which is reflected in the record amount of clients we have brought onboard in the first half,” said Mr Grantham.
A subsidiary of Skipton Building Society, Skipton Business Finance focuses on businesses with annual sales ranging from new-start to £30m.