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There is a widespread perception in the market that alternative finance is disruptive thanks to its burst onto the scene around 2011. But the industry has matured since its infancy, experiencing rapid growth, and many now consider it no longer to be ‘alternative’. Smart organisations are placing the SME at the heart of the decisions they make and positioning themselves as part of the wider invoice finance market.
The reality is that selective invoice financing provides a complementary solution to the working capital needs of SMEs who aren’t getting all they need from their current financiers. Top-up finance can support businesses who are unable to maximise funding due to limitations within their current facilities. Users don’t have to change providers, they can dip in and out of services as required.
Traditional invoice financiers can provide a whole ledger service to SMEs, but this can come with issues. Concentration limits mean that a financier won’t pay out for more than a set percentage of a ledger to one debtor, meaning companies need a wide customer base. Financiers are also often adverse to contractual debt, as well as the construction industry, where risks of non-payment are deemed much higher. The export market also holds a red flag, with funding generally being considerably more expensive, if available at all. All these factors mean businesses struggle to obtain satisfactory finance facilities.
Platform Black prides itself on providing solutions in conjunction with existing finance providers, ensuring an SME’s fund availability is maximised. As an example, we recently co-funded a car part manufacturer who had both domestic and international debtors. We were able to fund all export invoices, whilst the other financier financed the domestic debt. This was done by way of a security sharing arrangement, and with the co-operation of all parties involved. As a result the client was able to raise significantly more finance than in their previous facility.
In a second case in point, Platform Black provides repayment of a trade financier’s exposure at the point the invoice is raised, by paying the financier directly, something most financiers would avoid.
Working with other financiers, we can also provide funding for SMEs where their current financier won’t fund specific debtors. The financer can waive the security on the debtor, or even specific invoices if they’d prefer, allowing Platform Black to provide the funding where they can’t.
These examples show the flexibility of our invoice trading model and the misconception of the disruptive nature of alternative finance. The willingness of all financiers to work together, alternative or not, is paramount to the successful funding of UK SMEs.
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