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Invoice finance gaining popularity as demand for credit returns

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David Avery, chair of the Irish Asset and Invoice Finance Association

David Avery, chair of the Irish Asset and Invoice Finance Association

David Avery, chair of the Irish Asset and Invoice Finance Association

Irish companies are increasingly turning to invoice financing to fund growth, with nearly €1bn advanced by mid-year from non-bank lenders who extend credit based on customer orders.

Firms utilised €971m of funding in the second quarter, up from €856m at the end of Q4 2020, an increase of 13pc, according to the latest figures from the Irish Asset and Invoice Finance Association (IAIFA).

The industry group said the rise showed that more and more Irish businesses, particularly SMEs, were using invoice finance to fund greater turnover and growth following the easing of Covid restrictions.

“Our latest figures highlight a significantly increased level of sales from Irish SMEs, across multiple sectors, that have benefited from innovative invoice and asset-based lending solutions over the past few months,” said David Avery, chair of the IAIFA.

“Not surprisingly, given the times we have just come through, many business owners do not want to take on additional debt in a bid to fund cash flow or finance growth plans. As a result, many are now opting to utilise invoice finance solutions which is a debt-free funding option.”

Invoice finance helps businesses release working capital outstanding from unpaid sales invoices, making income available before they have received it from their customers. Many companies use the facility to invest in infrastructure or equipment, as well as to finance mergers and acquisitions activity, management buy-outs and buy-ins.

Sales turnover generated by Irish companies using invoice finance totalled €7.5bn in the second quarter, up 18pc over the same period in 2020 and 15pc higher than in the first quarter, according to the IAIFA.

The IAIFA said €2.7bn in funding was currently available through its members, which include the commercial finance arms of traditional banks as well as non-bank lenders

Alternative finance options for business are now becoming more mainstream, with greater numbers turning to asset-based or peer-to-peer lending in recent years.

Traditional bank lending to business has been experiencing a decade-long decline as SME customers have paid down their debt and banks have tried to shrink their balance sheets to become less risky and more capital ­efficient.

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