History of factoring, invoice discounting, factors discounters association UK

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.

Asset Based Finance Grows For Third Consecutive Quarter

New figures out today from the Asset Based Finance Association show lending to businesses has grown for three quarters in a row.

Total advances from members this quarter is £15.1 billion, a growth of 4% year on year. This growth continues to show growing confidence among firms in accessing the funds available to them and is the highest total lending figure since March 2009. The ABFA figures clearly show that this form of lending is very much open and available to businesses, in stark contrast with wider net lending which continues to fall.

Sales from firms financed by asset based finance have performed particularly strongly this quarter with a double digit rise of 11%. Year on year figures also show a similar growth of 11%, indicating that firms which use invoice finance are growing sales and out performing the wider economy.

The total values against which the lending is made are also at a record high, standing at £31.7 billion, the highest it's been since 2006, indicating the increasing strength in the balance sheet of businesses using this form of finance.

Export invoice discounting has shot up 49% this quarter to sales of £33.29 billion, continuing the trend seen last quarter that firms are increasingly looking abroad for sales and growth opportunities.

Kate Sharp, chief executive of the Asset Based Finance Association, said: "These quarterly stats confirm the trend that asset based finance is rising in popularity and is a vitally important form of business lending. While other forms of lending are showing a decline, this is the third quarter in a row where total lending from ABFA members has increased. SMEs and larger companies which use asset based lending are clearly enjoying increased sales and it's really good to see this positive news when other indicators are broadly negative."

To view the full report on the statistics for Quarter Three 2010 please click here.

With thanks to Asset Based Finance Association for kindly providing this information.