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A new report from Siemens Financial Services (SFS) highlights the role of invoice finance in helping SMEs to expand into overseas markets. The report notes that one of the greatest perceived obstacles for SME’s overseas growth is access to working capital. Invoice finance is enabling SMEs to overcome this challenge.

The report shows that 59% of businesses that mainly or purely sell to domestic markets have achieved revenue growth over the past 12 months. For companies selling internationally this figure was 67%.[1]Relatively few smaller firms are tapping into export markets, however, and there is huge potential for growth in sales abroad.

Essentially, invoice finance works in the same way for businesses trading overseas as those trading domestically. By using invoice finance, when a company invoices their customer, up to 90% of the approved invoice total is immediately advanced by the finance provider, with the remaining 10% paid once their customer settles the balance. This provides the company with essential working capital so it can then invest in expanding its business without having to wait for bills to be paid.

For SMEs that export, this cash flow can be particularly attractive as they may be concerned by the perceived complications of working with new customers based in other countries. Initial obstacles include the length of time involved in securing new business and associated upfront costs which can put a strain on working capital. Invoice finance can therefore provide exporting SMEs with adequate and flexible funding to maximise global opportunities.

An increasing number of businesses are realising that invoice finance can help to provide a gateway to the global market. Members of the Asset Based Finance Association (ABFA) reported that in the quarter ending in December 2016, Export Discounting increased by 30% (compared with the same quarter the previous year).[2]

Ian Cole, Head of Invoice Finance, Siemens Financial Services comments: “A large proportion of UK SMEs trade with overseas markets. A significant proportion of those that don’t, however, cite concerns relating to cash flow and working capital levels. Support from the right financier means there’s no need for this to be the case.Invoice finance is perfectly suited to helping SMEs through the initial months of global trading and our report shows that there are huge gains to be made by taking this step.”

The full report can be downloaded here https://www.siemens.com/uk/en/home/products/financing/working-capital-finance/invoice-discounting.html

[1]MindMetre, 2015.

[2] Asset Based Finance Association (ABFA), Quarterly Statistics to December 2016