Invoice finance steps in as banks step back
Traditional bank solutions often fail to meet the undulating requirements of firms with seasonal peaks. Invoice finance is emerging as a vital tool, scaling with turnover and smoothing cashflow cycles, helping UK businesses maintain resilience and momentum year-round.A comment by eCapital.
Running a business can feel like riding a roller coaster, particularly in sectors where seasonal trends play a decisive role. From garden centres facing sharp drops in winter trade to retailers relying heavily on the Christmas rush, seasonal fluctuations place pressure on cashflow.
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This seasonality can push businesses with fluctuating demand cycles into a recurring pattern of feast and famine. As revenues decline during quieter periods, firms can struggle to cover fixed costs like rent, salaries, and stock replenishment. Off-peak months often expose these weaknesses in working capital, especially in industries with high operating costs and narrow margins such as in retail, hospitality, and logistics and transportation.
Exacerbating these issues are the lack of appropriate conventional bank solutions, with some lenders unable to flex to meet the undulating requirements of businesses with seasonal peaks. Over recent months and years, many of these mainstream lenders have also tightened their lending criteria or exited the market. Indeed, a study by the British Business Bank (BBB) suggested that the five largest banks’ share of lending to smaller businesses fell from 63% in 2014, to 41% in 2023. This has led to an increase in businesses seeking alternative, innovative funding solutions, whether it is applying for start-up loans issued by the BBB, seeking grants and loans, or, increasingly, turning to alternative funding solutions, such as invoice finance.
Importantly with invoice finance, credit limits can scale with the business. As turnover grows, lenders are able to increase borrowing limits – and at short notice. With specialist invoice finance providers there are often fewer conditions around borrowing, allowing organisations to distribute the cash as they see fit. More than that, invoice finance providers can offer a range of benefits suited to firms with atypical payment cycles. This includes a direct, nuanced understanding of the client, its sector and the region(s) it operates in, and the ability to provide funds at speed.
Invoice finance
Invoice Finance is a method of cashflow funding that uses receivables (invoices) as the principal asset against which money can be raised. The invoice financer pays the firm an agreed percentage of the invoice value (up to 90% typically) as soon as it is submitted, driving access to liquidity at the point of invoice as opposed to needing to wait.
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By GlobalDataWith invoice finance, funds can be provided in days rather than weeks and capital can be provided without diluting company ownership, or adding unnecessary debt. Businesses can use the finance as they see fit. Furthermore, invoice finance provides the opportunity for businesses to obtain access to funding that can flex with their sales, and smooth cash flow peaks and troughs.
The funding also adapts with the needs of the business. Facilities expand with stock cycles and sales, rather than hitting a cap when companies need it most. Importantly, approval is often based on assets or invoice quality rather than borrowing history. As businesses seek to maintain their foothold, and grow their market share, having access to liquidity at short notice can make a real difference.
Planning and execution
Seasonal businesses don’t have to struggle through the ups and downs of fluctuating demand. By combining proactive cash flow management with flexible financial structures, business owners can protect liquidity, reduce stress, and build long-term stability.
Resilient UK companies are increasingly adopting alternative finance to fill funding gaps and maintain momentum year-round. With foresight, effective planning, and access to the right funding, seasonal businesses can not only conquer cash flow challenges but also position themselves for sustained growth and success, in and out of season.
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