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History of factoring
The concept of invoice factoring originated over 200 years ago in the United States, but it was not until the 1960's that the first factoring services were introduced into the UK. In the early years factoring had a poor reputation, being seen as a lender of last resort.
The Association of British Factors (ABF) was formed in 1976 by which time a number of the UK's clearing banks had either bought in to the market or started their own operations. As a result factoring's image began to improve.
Invoice Discounting
The market really started to take off in the 1980's with the introduction of invoice discounting and with an annual growth rate of 20% invoice discounting soon overtook factoring volume. This attracted many new entrants, some of them foreign owned until today there are over 50 providers of factoring and invoice discounting in the UK.
Asset Based Finance Association
The Asset Based Finance Association, formerly known as the Finance and Discounters Association (FDA) is a UK based trade association representing an industry with forty years experience of providing much needed working capital into UK businesses. In the UK and Ireland alone funding is provided to circa 48,000 businesses in the manufacturing, distribution, transport and service sectors involving the processing of invoices having a value of £208 billion each year.
| ABFA Statistics | 2008 | 2009 Q1 |
Change % | |
| Total Volume | £208 billion | £45.66 billion | ||
| Total Advances | £30.80 billion | £15.05 billion | ||
| Total Clients | 48.152 | 46.999 | ||
| ABFA Volume | March '08 | March '09 | ||
| Domestic Factoring | £4.83bn | £3.86bn | -20% | |
| Domestic Invoice Discounting | £41.26bn | £38.86bn | -6% | |
| Export Factoring | £0.40bn | £0.39bn | -1% | |
| Export Invoice Discounting | £2.12bn | £2.26bn | 7% | |
| Import Factoring | £0.41bn | £0.27bn | -34% | |
| ABFA Client Numbers | ||||
| Domestic Factoring | 22.800 | 21.351 | -6% | |
| Domestic Invoice Discounting | 19.361 | 19.207 | -1% | |
| Export | 3.586 | 3.767 | 5% | |
| Import | 2070 | 1.962 | -5% | |
| Stock Finance | 78 | 87 | 12% | |
| Import | 641 | 615 | -4% | |
LATEST ABFA FIGURES REFLECT ECONOMIC CLIMATE
The asset based finance industry's latest figures show a fall in total finance provided to companies. The tightening of the market reflects the overall decrease in UK corporate activity and the figures highlight that there are still substantial funding lines available to UK businesses.
Total client sales were £45,667 million, a drop of 7% from March 08. Total advances to companies was down to £15,057 million, a decline of 8% from last year.
Interestingly, advances against stock rose significantly, by 96% and export invoice discounting also maintained growth, showing a solid 7% increase, continuing the trend for firms to look overseas for additional business opportunities.
These figures compare favourably to other traditional funding routes. For instance consumer lending showed a 12% reduction and new figures from the British Bankers Association also show significant falls in high street lending to businesses.
Kate Sharp, chief executive of ABFA, said: "Asset based finance is still providing funding streams for 48,000 UK and Irish businesses and is still advancing funding of £15 billion on a quarterly basis. Hence, while these figures do show a drop in overall lending, this is entirely to be expected in light of the fall in overall UK business activity during the period as firms downsize and change their business strategy. The main thing to highlight is that the ABFA members are providing substantial funding streams to help support businesses through the recession".
With thanks to Asset Based Finance Association for kindly providing this information.
