Another invoice finance deal completed – this time we found Confidential Invoice Discounting (CID) for a Printed Circuit Board (PCB) and Cable Assembly supplier. We were pleased to be able to find them a cheaper CID facility that was also more straight forward than their existing facility.
Confidential Invoice Discounting provides funding against the outstanding unpaid sales invoices of a business but allows the business to maintain their own in-house credit control function. With a Confidential facility there isn’t even an assignement clause on the invoices so the customers are not told that our client is using an invoice finance facility.
There have been numerous new entrants into the invoice finance market recently with more new start invoice finance companies rumoured to be planned. All positive for us as it gives our clients mire choice. The big problem for new entrants seems to be finding the backing and funding line in order to start a factoring and invoice discounting company.
Those that want to set up an invoice finance company seem to fall into two groups, the “haves” and “have nots”. The “haves” have the contacts to access multi-million pound funding lines from investors and the “have nots” don’t!
Sadly, there are several talented individuals within the invoice finance industry that want to start factoring and invoice finance companies on their own but don’t have contacts with the funding, or need other industry people with different skill sets e.g. sales, client management or finance. Similarly there are investors who would be interested in funding the invoice finance sector, which can yield a good investment return, without experienced individuals in which to invest.
If you are interested in funding a new start invoice finance company or you want to start one get in touch in confidence and perhaps we can put parties together.
Continuing to build on the results from our survey of 100 businesses about what establishes trust with a business finance website, nearly 17% of the responses to the question we posed about what makes businesses trust business finance websites were that they rank well in search engines!
High rankings in a search engine seems an odd way to determine whether a webiste it trustworthy, and it probably attributes more faith in the rigour of the checks made by search engines than is perhaps warranted but that is still a significant result and was given without prompting.
We all need to get on with our SEO activities!
So in addition to the 52% of new start businesses that used a bank overdraft to fund their business, a further 32% of the 100 respondents to our market research survey of new start-up businesses used a bank loan for their initial funding.
In total that is 84% of new start up businesses that were using some form of traditional bank finance in order to fund their startup.
There are some very interesting results to follow shortly about the lack of adequacy of that funding and the consequences of the funding restrictions that these new start businesses experienced.
These results complete the picture of how the new start-up businesses in our market research survey said they funded their new business:
- 52% Bank overdraft
- 32% Bank loan
- 14% Own or family money
- 2% Invoice finance
More results from our market research survey of 100 start-up businesses. We found that 52% of the startups that we interviewed said that they used a bank overdraft to fund their new start business. Interestingly that figure is lower than the number of businesses that we have found to use overdrafts generally in previous surveys (we previously found that 88% of businesses said that they had a bank overdraft). That might indicated that overdrafts are not so freely available to new start businesses, but its not of course conclusive. Bank overdraft is certainly not the only option that is open to a new start business.
Its interesting that since I highlighted our findings that showed that new start ups didn’t think they would be suited to invoice finance and hence only 4% of new start businesses even considered it, I have been contacted by several invoice finance companies saying that they are active within the start-up sector! Its just a case of putting those new businesses in touch with the funders that can help them.
I was also interested to note and retweet a tweet (there is a button linking to my twitter feed at the top of the the right hand column) from Aldermore Bank (who have an invoice finance arm) sharing their research finding that “80% of business owners cited obtaining finance as the main disincentive to starting a company”. Interesting when you start putting all these statistics together!
It might well be the cheapest form of funding - to use your own cash or family money, but 14% of the startups that we interviewed said that they used either their own money or family money to fund their new business initially. It is probably a good way to keep costs down, assuming your family are not charging you to borrow the money!
However, you also have to factor in the loss of any return on the money that you were earning whilst it was invested. The other issue of course is that once you have spent that money it’s gone – you may not find it so easy to borrow more money once your business is in trouble and your investment has been used up. There could be some wisdom in making the business fund itself through either overdraft, bank loan or alternative forms of start-up finance such as invoice finance rather than risking your own funds.
Either way, if only 14% of start up businesses used their own/family money it suggests that normally an alternative source of finance is going to be needed. I will publish more soon about the other funding options that start-up businesses say they use.
In our market research survey of 100 SME businesses we asked them about their buying behaviour from finance websites. One question we posed was “If the following things appear on a company website do they make you more likely to buy from the business?” – we then asked them to answer that question in respect of “Awards“.
The result was the a unanimous 100% of respondents said that the presence of awards on a company’s website would make them more likely to buy from that business.
You can view details of Cashflow Acceleration’s awards here: Cashflow Acceleration’s Awards
In our recent survey of a randomly selected sample of 100 new start businesses only 2% said that they actually used invoice finance to fund their start up business.
As I have posted previously, only 4% of those startups that we surveyed said that they had even ”considered” invoice finance and of those that didn’t consider it, 39% of them said they didn’t consider invoice finance as they didn’t think that invoice finance was an option for new start businesses, a complete misunderstanding of how the invoice finance market works.
Invoice finance can be the perfect funding solution for a new start business and there are many providers, both bank owned and independent that are very happy to provide funding to new businesses and start-ups.
Yesterday I revealed that a startling 96% of new startups didn’t consider invoice finance to fund their new start business. We then went on to ask them why they didn’t consider invoice finance as an option.
The top answer given by 39% of respondents that didn’t consider invoice finance was that they “didn’t think invoice finance was an option for start ups”.
This shows a real lack of understanding of invoice finance – it is available to start-ups and there are numerous invoice finance companies that will provide funding for new start businesses.
More results from our start-ups survey will follow.
I have new results just in from our new business start-ups survey. We interviewed 100 new start businesses about how they funded their business. The target list were all businesses that were recently started but without any propensity towards the use of invoice finance i.e. a generic list of recent new start businesses.
We asked a number of questions and I will share their responses over time but the first statistic that I want to share is this: 96% of the respondents didn’t even consider invoice finance as a funding option for their new startup business. This is despite their being literally dozens of factoring and invoice discounting companies crying out for new business that are quite prepared to fund new starts from inception.
Over the next few days I will share their responses about why the vast majority of new start businesses didn’t even consider invoice finance as a funding source for their startup.