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Call for small firms to be better educated in advantages of factoring and invoice discounting

Small firms need to be much better educated about the sources of funding that are available to them through factoring and invoice discounting, says Margaret Webster, Finance Director of Close Invoice Finance.

She was responding to a recent report from The Institute of Chartered Accountants (ICAEW) looking into the working of the Small Firms Loan Guarantee Scheme (SFLG), set up as a joint venture between the Department of Trade and Industry and a number of approved lenders.

The scheme was set up to help SMEs to find funding where they are unable to obtain a conventional loan because of lack of assets to offer as security.

Ms Webster commented: "It is fair to say that even though there have been some changes to the criteria for granting the loans, the SFLG has not been entirely successful. There are a number of disadvantages to the scheme. The application process is too complex and lengthy. There is an additional premium charge of 2% on the loan and the interest rates charged are likely to be higher than other forms of lending. There are restrictions on the size of the loan and the length of the loan. All available security must be used up against other forms of lending before a SFLG will be granted."

"If a small firm is looking for finance," Margaret Webster said, "they might look at the Small Business Service website for guidance.

"Although bank loans are an option, at Close Invoice Finance we are convinced there is a better choice for SMEs. We wholeheartedly agree with the ICAEW recommendation that much more effort should be made to educate small businesses about the various sources of funding available. An alternative to approaching a bank for a loan is to obtain funding from a Factor or Invoice Discounter. An independent company such as Close Invoice Finance can provide funding on the security of the small firm's sales invoices. This is a personalised service where the needs of the small firm can be met. The firm will not need to go through all the hoops which an SFLG would require".

Close Invoice Finance is part of the Close Brothers Group, one of the City's most enterprising and respected merchant banks. The company provides a full range of working capital finance tailored to meet the need of individual clients, including Invoice Finance, Invoice Discounting, MBOs/Acquisitions, and Trade/Stock Finance.

Further information:
Margaret Webster, Finance Director, Close Invoice Finance, 01635 508400

Tony Charlesworth, Llewellyn-Slade PR, 020 8398 8597


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