We surveyed a sample of 100 high growth businesses and asked them about their business financing, the consequences of their funding choices and to what extent invoice finance played a role.
We selected a random sample of businesses where the only common factor was that their sales turnover had grown by 20% or more over the previous year – these we designated as “high growth” businesses.
We started by asking them if they had been able to raise all the finance that they needed. Only 41% of the respondents had been able to raise enough funding.
Within our sample we found that 12% were users of factoring and invoice discounting and they all confirmed that they had sourced sufficient funding. This proportion amongst fast growth businesses is much higher than the average distribution seen amongst businesses generally, which we have previously estimated to be less than 1%.
We identified a further segment which we called the “maximum growth” segment. These were businesses that said that they were unable to grow any faster than they were already growing. 52% of this segment said that they used invoice finance to fund their business which is very high when compared with the normal average distribution of less than 1%.
There were 59% of the total number of respondents to our survey that said that they had not been able to raise enough finance. They went on to tell us that on average they were 43% short of the funding that they needed.
We asked these businesses with funding restrictions what type of funding they had used. The results were as follows:
48% Loan
32% Overdraft
20% Family money
We went on to ask them about the effects of these restrictions on their businesses and these were the consequences they said had arisen from not having had enough funding:
43% Had to turn down business
24% Now owed money
15% Became loss making
9% Had to get rid of staff
5% Had poor cash flow
4% Didn’t grow as predicted
We then asked the 59% with funding restrictions if they had considered invoice finance as an option. 84% of this segment didn’t consider it as an option and these are the top reasons that they gave for not having considered it:
34% didn’t think invoice finance was an option
24% hadn’t heard of invoice finance
27% said it wasn’t offered
12% mentioned they’d heard it was subsequently pricey
