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Banks over-charge UK businesses £425m per year for short-term finance

By CreditMan Tuesday, April 21, 2015

The 26,000 UK businesses that use short-term working capital finance from leading banks are being stung by hidden fees and over-charged. A study by the leading short-term peer-to-peer finance provider MarketInvoice, has found:

  • Businesses are paying over £425m per year in unnecessary fees*
  • Businesses are facing up to 35 different hidden fees in invoice finance contracts
  • Two-thirds of businesses don’t trust their bank not to overcharge them**
  • Banks charge 6.4p for every £1 of invoice finance, compared to 2.8p at MarketInvoice*
  • Customers have taken matters into their own hands, launching a campaign for regulation

The majority of short-term finance for businesses is invoice finance. The UK has the largest invoice finance market in the world, with 50,000 businesses borrowing £20bn every three months, mostly from three leading banks (RBS Invoice Finance, Lloyds Invoice Finance, and HSBC Invoice Finance). The market is currently not regulated, meaning providers are not set clear standards of how to communicate prices.

MarketInvoice is a leading peer-to-peer lender which businesses use to raise short-term working capital. Businesses using MarketInvoice have on average saved £16k per year, resulting in a total of more than £10m.

Anil Stocker, Co-founder and CEO of MarketInvoice said:

“Thousands of UK businesses are being over-charged for short-term finance. This is costing thousands of businesses £16k per year on average and hundreds of millions in total. Businesses are afforded very little protection from hidden fees and long contracts because invoice finance is not regulated, as a result the market is plagued by bad practice. For now, the onus is on businesses to get free of their bank and explore alternatives.

“At MarketInvoice we represent a way out - we’re helping businesses break-up with their bank and avoid this kind of over-charging. Since launch in 2011 we’ve saved UK businesses over £10million and will do more than that again this year alone. We have no hidden fees whatsoever and companies can leave with no notice.”

About the research:

  • We compared the revenues from banks’ invoice finance arms reported to Companies House, with banks’ self-reported advanced volumes in invoice finance. The banks’ cost-per-pound invoice finance represents total invoice finance revenues as a proportion of total advances in invoice finance. We did the same calculation for MarketInvoice (including investor returns in our revenue).

** MarketInvoice surveyed 1,000 business owners and managers across the UK.

About MarketInvoice:

MarketInvoice is a peer-to-peer lender for businesses. It is one of the largest peer-to-peer finance platforms in the world, having completed the most loans of any peer-to-peer business lender.

Businesses can sell outstanding invoices to investors to release funds up-front. Founded in 2011, more than £375m of invoices have been traded.