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Receivables Finance – Bolstering SMEs In The US

Wednesday, March 17, 2021

Despite the challenges of COVID-19, the US receivables finance market has remained strong, with 40% of firms reporting an increase in demand, and almost a quarter (22%) reporting an increase of up to 50%.

These are just some of the findings of the Receivables Finance Global Outlook, a new series of EQ Riskfactor reports. The first volume is titled Gearing up for Growth and subsequent volumes will be published quarterly throughout the year. Like Volume 1, each will feature valuable insights from finance leaders and industry experts across the US, UK and European markets.

A Bullish Outlook

The sector’s resilience can be attributed in no small measure to the crucial role it has played in supporting growing small-to-medium sized enterprises (SMEs) within the US. SMEs, which comprise almost half of the US economy , often rely on bank credit as their main channel for financial support. But during times of crisis, traditional lenders tighten their credit lines. As businesses seek alternative sources of funding, receivables finance can offer a valuable solution.

Because it is based on two metrics – the value of a company’s outstanding invoices and the payment history of its clients – receivables finance is different to a term loan where funds are secured against assets. This means approvals and access to funds are far quicker, and growing SMEs that opt for the receivables finance route are not impacted by crises or other short-term impacts.

“Receivables finance provides the perfect vehicle to support these businesses – both through the pandemic and subsequent economic recovery,” says Michael Ellis, Managing Director EQ Riskfactor.

Strong businesses that had not previously considered receivables finance are now seeing the clear benefits of this model, including fast access to working capital and long-term scalability.

— Michael Ellis, Managing Director, EQ Riskfactor

In times of crisis, as risk organisations tighten credit, traditional credit lines gravitate towards a receivables finance and/or asset based working capital structure, so there’s been an increase in business.

— John De Pledge, Head of Asset-based Lending, Leumi Business

Moving forward

Looking forward to 2021, 96% of US respondents within the report forecast growth. Part of this optimism may be driven by a $1.9 trillion stimulus plan recently passed by the Senate , plus a further stimulus called the Payback Protection Program which has certain loan payback forgiveness measures built in. But many observers also point to receivables finance as a vehicle for future growth.

“Our research clearly shows that receivables finance is well placed to help businesses access cash flow, not just during but also beyond the pandemic,” says Michael Ellis.

There are high levels of optimism in the market globally and receivables finance will have a clear role in driving the economic recovery.

— Michael Ellis, Managing Director, EQ Riskfactor

Read ‘Gearing Up For Growth’

Alongside these insights, the first EQ Riskfactor Receivables Finance Global Outlook report covers issues such as demand dynamics during the pandemic and strategic priorities moving forward – how businesses will use technology, develop and retain employees, and mitigate risk. Future quarterly reports will explore developments as they unfold, revisiting views, opinions and analysis as we see how the impact of COVID-19 evolves over the coming months.

Read the report