MarketInvoice Review: How Good Is It For Raising Invoice Finance?

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Peer to peer lending has grown dramatically over the last 12-24 months. From initially just personal loans and then business loans it now also encompasses the Invoice Finance market. The first entrant and still the biggest player here is MarketInvoice; but do they offer a viable proposition for UK SMEs? We'd like to conduct a MarketInvoice review.

Firstly let's look at how the invoice finance market is traditionally structured. Broadly speaking there are two options:

1. Invoice Discounting: here a company's entire sales ledger goes through the invoice finance provider. All invoices, whether finance is required on them or not are financed on an ongoing basis for a minimum term of usually 6 or 12 months. While this does aid the company's liquidity, it may mean that invoices that maybe don't need to be financed still have a charge applied, possibly incurring an unwanted cost for the company. In addition this option is traditionally only available to larger, established companies with a turnover of at least £500,000. On the plus side the length of the arrangement means fees are relatively low and the company retains control of their ledger so the Debtors don't have to know their invoice is being financed.
2. Factoring: this is more suitable for smaller or even start-up companies as minimum turnover levels are about £50,000. Even better, the company doesn't have to factor their entire sales ledger and can selectively choose which invoices to finance when funds are needed. However the downside is that this flexibility comes at a price and factoring tends to be expensive. Additionally the company cedes control of their sales ledger so Debtors will deal direct with the Factoring agency.

Both methods have their advantages but wouldn't it be good if you could blend the best parts of both options? This, we think, is what MarketInvoice has managed to do.

 The advantages of MarketInvoice are:

• As the most established P2P Invoice financing platform they have access to a lot of liquidity. Invoices are funded very quickly, often within minutes
• There are no commitments and the SME can auction invoices selectively without entering into lengthy contracts
• No Personal Guarantees, Debentures over the business or extended contracts are required thereby giving the applicant greater flexibility than traditional invoice financiers.
• The company retains control over their sales ledger so Debtors never have to know their invoice is being financed
• The platform is open to companies of any size or age
• Fees are low. The current structure charges 2% on the first £200,000 of invoices funded by the company and just 0.5% on ever invoice after that, regardless of the term of the invoice, although this is subject to a minimum fee on each of the first two invoices of £1,250. This structure suggests they are targeting larger companies with larger invoice sizes.

But should you be worried that is is still relatively "new" or "untested"? In our view, absolutely not. Since its launch in Feb 2011 MarketInvoice has funded over £200m of invoices for more than 250 UK SMEs and recent months have seen monthly volume records being continuously broken as more businesses turn to them to finance their invoices. .

Are there any downsides? Well, for balance we have to mention perhaps two in this MarketInvoice review:

• To qualify to list your invoices you need to be dealing with 'blue chip' Debtors. The only way you can fund an invoice from "Bob's Garage" or other small businesses is if you also have some blue chip debtors being funded as well.
• Arguably there is a lack of convenience in that each time you want to raise finance you have to start an auction. However the process is highly automated and we feel this small extra effort is well worth the savings you reap. You can even upload multiple invoices at once and have them financed as one.

The success of MarketInvoice is reflected and flattered by the arrival of another new player, Platform Black, in 2012. Though newer, Platform Black works in largely a similar way and their fees are (for now) marginally lower. It will be interesting to see how both progress in the coming years but we strongly feel this market is set for accelerated growth.

If you'd like to discuss listing your invoices on either MarketInvoice or Platform Black then Choice Loans can help you do this at no charge. We've been working with both firms for some time and hope we can be in a position to advise you what is best for you. To speak to an Advisor please either complete our Invoice Finance inquiry form here or call us on 0845 1260350