The problem of late payments in the UK is so serious that it now contributes to the closure of 50,000 businesses a year, according to the Federation of Small Businesses. But the French invoice financier Aria is confident its technology-based solution, launching in the UK this month, can help reduce that number.
In its home market, Aria has been growing 25% per month since its launch in 2021, and CEO Clément Carrier is confident the UK could be an even bigger market. “Our growth has been fueled by solving a real problem for freelancers and businesses,” says the company’s co-founder with partner Vincent Folny. “Opening up the UK market is an important step in our journey to change the way businesses pay and get paid.”
The concept of invoice financing is relatively simple. When a company completes a piece of work for a client, say a large corporation or public sector organization, it usually has to wait a certain period of time for payment; 30, 60 or 90 days is common, although there is no guarantee that the bill will be paid on time. Instead, the company could ask an invoice finance provider to pay the amount due immediately, less a fee for the service; the provider then later gets his money back from the customer.
Aria’s model differs slightly in that its invoice financing service focuses primarily on the business-to-business (B2B) platforms that many large companies now use to commission small businesses and freelancers. These platforms can integrate Aria’s invoice financing proposal into their own technology, white label the service and customize the customer experience.
However, the net result remains that the freelancer or small business is paid much faster. Aria believes the service also adds value to the platform, enhancing the experience freelancers and small businesses enjoy when transacting through the platform. Buyers, meanwhile, can continue to settle accounts with standard payment terms of up to 90 days.
Progress on subsequent payments is desperately needed, says Tina McKenzie, policy chair at the FSB. “Small businesses are already being stretched beyond their limits with rising utility bills, rampant inflation and a deepening cost-of-living crisis,” she warns. “Cash flow is already tight, exacerbated by months of waiting for invoice payments, which is a serious barrier to growth and investment; this also hinders productivity due to the excessive time and effort spent chasing behind payments.”
Research shows that the UK suffers particularly badly in this regard. The average small business now reports a payment delay of 15.6 days, the worst figure since 2016. One in 10 UK businesses admit to deliberately delaying payments to suppliers for more than 30 days.
A result of this is strong growth in the invoice financing market across the board. Data from UK Finance shows that providers supported £314 billion in customer sales in 2022, up from £276 billion in 2021, and well above the previous record of £288 billion in 2018.
Leading providers include fintech companies such as MarketFinance and GapCap, specialty finance companies including Bibby Financial Services, Aldermore Invoice Finance and Close Brothers Invoice Finance, and mainstream banks, making progress through their commercial banking services.
However, Aria believes it has discovered a gap in the market for an integrated platform invoice financing solution. Enabling freelancer platforms and B2B marketplaces to offer invoice financing themselves should take the burden off suppliers who might otherwise have had to arrange their own invoice financing. The technology can also be implemented in software-as-a-service models or even enterprise resource planning (ERP) software from large companies.
“After Covid and in the current economic climate, more and more companies are looking online for temporary staffing solutions,” said Tom Lamb, who has hired Aria to lead the new UK office. “By collaborating with our platform partners, we are making solving this critical problem simple, easy and automated for businesses and freelancers,” he claims.