There are three myths that may be holding brokers back from helping their small business clients find success. That is the view of ScotPac senior executive Wayne Smith, who believes brokers play a key role in helping SMEs secure the right funding as they navigate the challenges of 2020.
The myths relate specifically to invoice finance, also known as debtor finance – a type of lending that uses the invoices of a business as security, rather than property.
“It’s important to dispel these myths about invoice finance, so brokers feel comfortable in talking to their clients about the full range of solutions available in the marketplace,” said Smith.
The first is that of cost.
While invoice finance is competitive on price compared with an unsecured loan, there’s a bigger picture to consider when weighing it up against a bank loan.
Not needing property security makes invoice finance a suitable competitor to the banks, he said, adding that a business may be able to generate more funding by releasing the value tied up in its receivable ledger if turnover is increasing and the property market remains flat.
He added that the actual cost of a facility should always be compared to the cost of not pursuing opportunities due to insufficient working capital.
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The second myth is that invoice finance is only used by businesses that are struggling.
In reality, it’s more a growth enabler than a last resort, said Smith, with ScotPac’s clients typically growing at three times GDP.
“Clients stay with us for a long time because this style of funding really helps them succeed,” he said.
“Some of the biggest companies on ScotPac’s loan book, with facilities of up to $100 million, fuel their growth by utilising the flexibility and lack of property security that invoice finance provides.”
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The third myth around invoice finance is that many brokers believe it takes a lot of administrative work to get a deal over the line – but this is not so, said Smith.
Thanks to an increasingly digital world, it is becoming faster and easier to access business finance, with ScotPac offering a streamlined solution in its Cash Connector facility. This integrates with common accounting software and can provide access to funds within 24 hours.