The upside to the economic downturn: Facing the financing challenge

COMPANIES are thinking more creatively about their funding in response to the challenging economic conditions, according to experts.

While the complaint that banks are not supporting business has become a familiar refrain in recent years, many companies have responded to the changing lending climate by reviewing how they are financed.

Financial solutions such as invoice financing and asset-based lending are now being actively considered by a broader range of firms.

Daniel Summerfield, regional director for the North at asset based lender Venture Finance, said: “Both factoring and invoice discounting are revolving facilities that
automatically adjust to suit a company’s sales performance.

“At a time of tentative recovery, having an invoice finance facility in place can be hugely beneficial to companies, enabling them to react immediately to an increase in sales performance and providing a dependable source of funding for the future.”

In fact, banks themselves are now increasingly moving into this once unfashionable space.

Neil Sevitt, regional managing director for RSM Tenon, said: “Invoice discounting will become the main form of bank lending.

“After property, with sensible loan-to-value ratios applied, the bank’s best security is against debtors – even a personal guarantee is not as strong as it used to be.”

The way companies are financing their activities in response to the challenging economic conditions is considered in more detail in a new 16-page supplement “The upside to the economic downturn”, from TheBusinessDesk.com in partnership with RSM Tenon.

Click here to read more features in this series and to download the supplement in full.