No-one you ask will admit a burning desire when they leave school to go and work as an invoice finance sales guy. It’s too niche an industry and I think most people just end up in it by accident or perhaps good fortune? And my journey is no different, less design and purely accidental. But this year marks my 20th anniversary in Invoice Finance and the following article reflects on how the industry has changed and continues to do so.
Back in 2001 the world of invoice finance was a hugely different place. It was very much bank dominated, and much smaller in terms of the playing field for independents. But it was an interesting time to get into the industry. Some reading this will recall that in 2001 the banking sector was hit by an earthquake with the New Zealand Court of Appeal referring a case known as Brumark Investments Ltd to our House of Lords in order to obtain a ruling on the status of a fixed charge holder in relation to book debts. That ruling drove huge growth in the invoice finance sector.
Prior to this, invoice finance was generally perceived as a funding line of last resort. If a client factored, it was disclosed as most facilities were back then. It was a sign of weakness, a sign that a business was struggling. Whilst some may still refer to this old school of thought, I think that the perception now has changed a lot – Invoice Finance is very much a tool of growth not of distress.
20 years on and here in the UK, we have finally reached the opinions held by other mature markets, such as the US, where invoice finance is mainstream with no stigma attached to it.
Here in the UK, there was resistance. This was largely due to a complete lack of understanding. SMEs needed support from the banks, but the banks were not willing to provide the right support and started scaling back their overdraft lending. In an ideal world, every SME would have just had an overdraft. But, trying to secure one was quite difficult without adequate security in place.
However, what this meant was that whilst there were objections, the reality was that there was a captive market, with little competition – not just from invoice finance providers but alternative lending sources as a whole!
With growth, came the drive for evolution of the product. What started off as a basic vanilla factoring evolved into a much more complex product which fitted many more SME profiles. Whilst the concept of factoring is historic, the market was not in its infancy. It was really at the bottom of a growth curve. It has of course become more challenging over the years with new entrants coming into the IF market. Not only this, there are many more options for businesses looking to raise working capital outside IF. This is extremely helpful for business and shows that the market in the UK is now, at least, a mature market.
One of the beauties of invoice finance is that it is a flexible product that can help so many businesses. Over the past 20 years I have helped hundreds of SME’s achieve their growth plans. These businesses have been of many varied sizes, and in different lifecycle phases from start-ups through to complex businesses in the commercial / corporate space. I’ve also assisted distressed companies going through an insolvency process, helping to secure jobs and maintain business continuity – all this using an Invoice Finance product! It has been so enjoyable working with companies at all phases of growth, demise and even phoenix rebirth. I guess that is the buzz of doing what we do. We’re helping businesses succeed and achieve their goals to grow.
Whilst the UK is now a mature market, I do think that Accelerated Payments has shown that the product continues to have scope to innovate. We are not reinventing the wheel, the fundamental principles of invoice finance still apply. Where we have innovated is that we see growth for our book in a market where the full book factoring and invoice discounting marketplace is and has been static for years. So, there is most definitely innovation in the market and I’m glad to be with an innovator.
As a unique and gripping industry, you form a continuity of relationship management with your introducer base. I still work with introducers now that I first met 20 years ago. I think as an industry, there’s not another quiet like it. You do not find many people who come into the invoice finance sector who then exit. Once you’re in, you become smitten. We all know each other in our local markets. In some ways, whilst there is competition, you also view your competitors as friends and colleagues. That’s what I love about it. It’s unique and you want to remain in it.
Once thing that is certain, there is no constant in the world of business in any field. Good businesses adapt to change. They don’t resist it. Five years ago, who would have predicted Brexit. Even two years ago, who would have thought we would still be in the recovery phase of a pandemic and the country would go through several lockdowns. Invoice finance has survived and remained open throughout. I think businesses are resilient too, even though there have been bumps along the road.
We have seen good examples of resilience coming through. Businesses which export are trying to prepare for an unseen. They don’t know what life is going to look like when they go back to the office (if they do). There is concern for us all, for funders, for banks. Not just for SMEs. Now we have left the EU we find ourselves in yet another period of change, the challenge for UK PLC is how we embrace this changing economic environment, and our response will determine our future success.
Compared with what has happened over the last 18 months – Brexit is looking less of an issue. People have been forced to prepare with COVID, forced to be agile and adapt, re-evaluating their business models and supply chains. I think it is inevitable that we will see casualties in months ahead. My insolvency profession contacts tell me we have not seen the full impact of Covid on businesses just yet, but with government support now all but withdrawn, it is only a matter of time before company failures spike. But again, out of that will come opportunity.
Whilst there have been many challengers to the generalist mindset, mainstream banks continue to have reduced appetite. Invoice finance is, on the other hand, full of innovation. As long as that remains the case, there will always be room in the market for players like Accelerated Payments.