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The unsung hero for SMEs: Why invoice finance is crucial in tough economic times

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There is something rather troubling at the moment regarding the future funding of UK (SMEs.

Certain media commentators will have you believe that ‘traditional’ lenders are in full retreat, neither having the appetite nor the resources to take a risk. It paints a picture of businesses wanting to grow, but being starved of cash to do so.

Cashflow funding doesn’t start and end with an overdraft, loan or credit card.

With cash being crucial to business survival and growth, Ant Persse, Managing Director, Optimum Finance, explains that SMEs need to ensure robust credit management activity to protect themselves from bad debt caused by business failure. They also need to access cash though funding to continue to enable them to adapt, innovate and grow. There is, however, a solution that could deliver to these requirements and could be considered an unsung hero during these tough times – invoice finance.

What is Invoice Finance

Invoice finance is a financing solution that allows businesses to receive immediate payment for their outstanding invoices, rather than waiting for their customers to pay on their own terms. In short it unlocks cash that could otherwise be trapped in your unpaid invoices. Invoice finance is a financial solution that can support the entire credit management process, protect against the risk of non-payment, and deliver funding when many other funding types are unable to.

It’s not new; indeed, it has been around for decades and supported many thousands of businesses and still does. And yet it continues to be overlooked by SMEs when seeking funding, and by the intermediaries to whom they turn for advice. Why? Because it has an image problem. More than this, it has an awareness problem.

According to the FSB Insurance and Finance Survey 2022, only 5% of businesses that applied for funding applied for invoice finance, far less than other funding types that can support working capital needs such as overdrafts (37%) and credit cards (19%). Yet the approval rate for invoice finance was one of the highest at 90%. This suggests that there is an awareness issue that needs to be addressed. Invoice finance can be the fundamental difference between make or break for many small companies and, in turn, our economy.

Liquidity and inflation challenges

Access to liquidity is more critical than ever as traditional financing providers are increasingly rejecting applications for cash. This is in part driven by the increased number of insolvencies and therefore perceived credit risk. SMEs are the backbone of the UK economy, however, and reducing the funding available to these businesses during tough economic periods only hurts it further. The demand for liquidity needs to be expanded during these periods, therefore, and not reduced.

Inflation similarly continues to be the top challenge facing small businesses this year, with many facing forced closures due to a loss of equilibrium on their balance sheets. Once the rising cost of electricity and gas are factored in, many SMEs’ margins will all but disappear. If they haven’t already, SMEs need to start preparing now for how they will finance these major increases in costs.

So why should they consider Invoice Finance? Invoice finance provides a variety of benefits for SMEs, including fast funding turnaround, and the ability to release cash tied up in unpaid invoices. Smaller independent funders like Optimum SME Finance also have more flexibility than traditional providers and can take advantage of value-creating opportunities. By changing the way SMEs are financed, they can survive and thrive in a post-pandemic, post-energy crisis, and inflationary Britain.


Providing the right SMEs with the pathway to secure lending will play an integral part in the economy’s resurgence – something which is in all of our interests, consumers, and businesses alike. Therefore, we need to drive awareness of products like invoice finance and those providers that offer them.

Invoice finance can be the fundamental difference between building a successful small business economy, or letting it wither on the vine. By embracing alternative financing options such as invoice finance, SMEs can not only survive but also thrive despite the challenges of a post-COVID world.

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