Invoice Finance What is going to happen in the next 5 years

You may have noticed that our invoice finance blog has been quiet. We haven’t done any blogs for a few months but you will be pleased (or saddened) to know that we are back up and running with our weekly blog. We stopped writing our blogs because we were inundated with work. We have taken on more staff and have aggressive plans with our company this year. Anyway enough about us we will reveal more in the coming weeks to come, back to business.

What Invoice Finance Posts Usually Contain

If you follow the industry and live and breathe it like we do then you will see regular updates from most funders and all of which seem to say the same thing. They all talk about how they are having record breaking years, we are seeing increased new business levels, we have never been busier etc.

As some of you may know the invoice finance industry over the last decade has certainly been an interesting one. With deal numbers increasing year on year, up until its highest point in 2008 with a record year of 48,637 live clients at the end of Q3, crashing down to 41,808 in 2010. So clearly a lot of funders taking some pretty big hits. But even last year the industry numbers are increasing but not by much, with the industry taking 43,708 clients at the end of Q3 in 2014. BUT the industry has stagnated at this for the last 3 years yet each funder keeps bragging about how well they are doing and how their deal numbers are on the up.

Even if you take an element of the PR BS out some of the big names in the industry do seem to be making the right noises by increasing their staff across the board. So the only way they can be winning new business is if the industry itself is levelling out in terms of who customers are happy to deal with. As historically the banks and 2 in particular have controlled about 50% of the market leaving the other 50% for the rest of us to chase after.

Competition in Invoice Finance Industry

Now anyone in the market will tell you that this is a very competitive industry and if the industry keeps stagnating as it is, I think we are going to see some casualties with some of the lesser known funders falling by the waist side. Equally to this I also think the industry is going to go more online and the playing field isn’t going to be as bank heavy and spread out to some of the big independent names in the industry. Don’t get me wrong I think the banks will always have a large chunk of the market but I think the days of a 50% stake are a thing of the past.

With the internet becoming a much bigger part of everyone’s lives and everyone’s trust in online platforms, I think to an extent the funders with a bigger marketing budget are the funders who will start to gain market share in the coming years. Make no mistake about it in our opinion the future of this industry is very much up for sale and it’s the savvier funders that spot this will be the ones to watch.

However just to be the devil’s advocate here even though client numbers are not what they used to be, client’s turnovers are a lot higher so even though client numbers peeked in 2008. There is 35% more money being factored in the industry today than there was a few years ago, despite the industry being 11% smaller. However the lifeblood of the industry is going to be in deal numbers moving forward.

We think the industry is going to grow in deal numbers (although not massively), but the cream in the industry is going to be in the larger turnover deals where there is more money to be made by the factoring companies themselves. However the main change is going to be the shift from the business owner’s mindsets of my bank manager will help me. Don’t get me wrong the banks will always have an edge over everyone as every business needs a bank account, but as the everyday business owner turns to the internet more and more I think the dynamics of the game are going to change.

Now we have put the world to rights, if you are reading this and you are already in a facility and you would like to see how much we could save you or even if you have clients that are looking into this minefield. Then don’t be afraid to get in touch and we will be more than happy to take a look at your details and get you into a great facility.