A recent market research report shows that the global invoice factoring is expected to grow by nearly 10% between now and 2031. Given that we are in the invoice factoring business, it comes as no surprise to us. We know exactly why more companies than ever before are turning to this ancient form of financing.
Allied Market Research reports that the global market was worth an estimated $1.9 trillion in 2021. It is expected to reach in excess of $4.6 trillion by 2031, making for a CAGR of 9.4% over the span. That kind of growth is spectacular.
The research market report digs into plenty of details, including driving factors and what they expect will be future opportunities. We will not get into those details here. Instead, will explain why our industry is projected to do so well for years to come.
A Majority of Global Businesses
The place to start is Allied’s finding that “the majority of businesses across the world were opting for factoring” in 2021. This finding alone demonstrates that invoice factoring is not limited to the U.S. market. It is a form of financing that is utilized by businesses around the world.
Allied goes on to say in the report that businesses are choosing invoice factoring “to fulfill short-term cash requirements.” Therein lies the number one thing driving our industry’s growth. Simply put, invoice factoring gives businesses quick access to cash. In an era when short-term cash needs seem to be more prevalent, factoring answers the call.
A Few Quick Examples
Invoice factoring is obviously inappropriate for long-term borrowing needs. But it’s ideal for meeting a company’s short-term needs. Here are just a few quick examples of the types of needs business owners turn to factoring for:
- Capital Investments – A small business might need to make capital investments in some new equipment. Making the investments now would help the business better serve its customers. Invoice factoring provides the cash to help them move forward.
- Equipment Repairs – Sticking with the same example, the company might be looking at equipment repairs rather than investing in new equipment. Invoice factoring provides the cash for such repairs at a rate that is potentially lower than more conventional financing.
- Day-To-Day Operations – Some small businesses turn to factoring to keep day-to-day operations going while they work on collecting delinquent invoices. Unfortunately, slow payers are part of every business.
All three examples demonstrate the utility of factoring when cash is tight. Getting set up with a factoring company doesn’t take a lot of time or require jumping through a lot of hoops. When companies are in a pinch, factoring can make an enormous difference.
The Future Looks Bright
Estimated annual invoice factoring growth of nearly 10% is good news for the industry. But our future looks bright for other reasons, too. For example, one of the driving forces mentioned by the Allied report is technology. Their research shows that access to invoice factoring will improve as technology improves.
Automation and artificial intelligence (AI) are two types of technologies just beginning to make their way into our industry. As applications are developed and matured, both will help factoring companies better serve their customers through greater efficiency, better products, and additional cash management tools.
Now is a fantastic time to be involved in the factoring business. It is also a great time to leverage invoice factoring for your own business needs. If you have never looked into it before, consider doing so. Invoice factoring helps businesses all around the world meet short-term cash needs easily and with minimal hassle.