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SME financing analysis from Positive Cashflow Finance

Since the recession, businesses have been understandably cautious when it comes to getting into debt, and the reticence of bank lending has been well documented. However, with the economy now showing signs of recovery, businesses are beginning to regain confidence in raising finance for growth.

A recent survey by BDRC continental market research consultancy revealed that of 5000 SMEs, 44 per cent chose alternative forms of finance in Q2 2013, up from 39 per cent from Q1. This trend is backed by statistics released by the Asset Based Finance Association (ABFA), which shows that total funding provided by the industry to clients has risen from &pound15.3 billion for the quarter ending March 2012 to &pound16.3 billion at the end of March 2013, a 7 per cent increase.

So why is Asset Based Lending (ABL) becoming an increasingly popular finance solution for businesses?

•    It puts an immediate injection of cash into the business providing a reliable source of working capital

•    It can smooth out irregularity in a firm’s cash flow

•    It gives access to additional capital if necessary, which can encourage a business to expand at a                    faster rate that might have otherwise been out of reach

As a relatively low-risk solution for businesses looking to expand or improve working capital, invoice finance is a useful form of ABL. It is ideal for SMEs looking for funding between &pound25,000 and &pound5 million and covers a range of financing solutions for businesses, based on assets such as stock, plant, machinery and property.

This type of funding can be used across a number of sectors that rely heavily on flexible finance options in order to maintain healthy cash flow and keep on top of repayments. It also gives a business the confidence and ability to take on new clients, employ more staff and invest in new technologies, for example. This will enable the business to grow at its desirable rate and reach its full potential.

Solid signs of improvement in the economy are encouraging businesses to look at alternative ways to fund growth and, with UK GDP growing at up to 3.5 per cent each year, the market is gaining confidence. Management teams are realising the need to ensure their business is adequately funded in order to support the growth, but they must also make sure they have researched the most appropriate lender to partner with. It can be very tempting to opt for the cheapest deal, which may seem like the best idea at the time, but might not be in the long term. Establishing a strong relationship with a supportive funder who understands the business will always lead to the best outcome.

CASE STUDY: Semester Recruitment

Semester Recruitment was founded in 2004 and is a specialist provider of health and social care recruitment solutions to voluntary organisations, local authorities and private sector businesses throughout the UK. Until 2009, Semester worked with a bank owned funder, but secured an invoice facility from Positive Cashflow Finance to meet its funding requirements in terms of flexibility and generating better cash flow. The funding has helped the team focus on its growth strategy and free up cash to invest in the business and spur on growth.

Nicola Jenkinson, director at Semester Recruitment, said: “We had been looking for a more flexible and supportive lender to work with as the business grows. Positive fit the bill perfectly. They demonstrated a real understanding of our values and our growth ambitions and have given us the financial flexibility to focus on achieving our aims.”

Positive Cashflow Finance is an independent invoice finance provider with offices in Manchester, Birmingham and Basingstoke offering facilities from &pound10,000 to &pound1million. 


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