2023 IF Charges Report & Analysis

In this blog, we will be outlining the key statistics from our 2023 IF Charges Report.
You can download the full report here: spark-intel.co.uk/if-charges-2023-report

Executive Summary:

In 2023, the Invoice Finance market witnessed a year of consolidation, with total new charges hovering around 4,600, closely mirroring figures from 2022 and nearly identical to pre-COVID levels in 2019 (before the impacts of the Pandemic, BBL, and CBLS in 2020 and 2021).

Despite this apparent stability, notable shifts occurred among lenders and sectors. Bibby continued to lead in new business, while RBS Invoice Finance experienced a significant uptick in activity, primarily involving companies with pre-existing charges within the Natwest, Ulster Bank, or other group entities.

Key winners in the market included eCapital, Apollo, Skipton, and Optimum, with Close Brothers also observing increased activity in the larger SME market. A decline in new deals within recruitment/staffing agencies, likely influenced by post-COVID legislation, was offset by rising activity in wholesale, logistics, and printing sectors.

The proportion of business represented by refactoring remained relatively constant (18.4% in 2023 compared to 18.3% in 2022). However, there were changes in the mix of refactoring channels by lender. The average borrower size experienced a slight increase, with approximately 600 companies disclosing trade debtors exceeding £1 million.

Noteworthy regional variations emerged beyond major Invoice Finance lenders. It's important to note that the accuracy of this report is somewhat constrained by the absence of data from major lenders such as Barclays and Santander. Nevertheless, we believe it provides a reliable representation of the broader market trends.

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Overview – New IF charges 2022 vs 2023

IF activity appears to be consistent with 2022, boosted by a strong start to 2023.

• An overall increase of 1% vs 2022, without RBS Invoice Finance, there is a reduction of 4.6%.
• Significant reduction in activity in second half of the year.
• 4.6k of new IF charges also recorded in 2019, before dropping to 3.2k in 2020 when other products – CBILS etc – took more market share.
• Majority (c82%) appear to be new facilities (not ‘re-factors’, where borrowers are swapping lenders), though we can not determine impact of Barclays, Santander etc.

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Analysis of new charges by lender & sector

Sector Analysis

Banks and large independents combined saw a small overall increase.

• Noticeable increase in activity in printing, following substantial drop from 2020 to 2022.
• Logistics activities remain strong, following a substantial increase in 2021.
• Wholesale trade is now at pre-COVID activity levels.
• Recruitment sector decline poses income risk for lenders. New recruiters in 2023 tended to be earlier stage businesses than in previous years, possibly due to COVID related changes. Activity peaked at 748 new facilities in 2021 (up from c600 in 2019) suggesting a return to normalcy. The same impact may be seen on businesses in care / health.

Lender Analysis

Banks and large independents combined saw a small overall increase. Both mid-tier and specialist IF lenders saw strong growth in activity.

• RBS accounts for the overall increase – majority have existing Natwest or Ulsterbank charges. 480 exceeds pre-COVID peak of 383.
• Material increases for eCapital and Skipton.
• Noticeable decreases for other banks, Lloyds + HSBC operating at c2/3 of pre-COVID levels.
• Reductions for Novuna and Kriya (formerly Market Finance).
• Apollo have aggressively expanded their market share with 78% growth of new IF charges compared to 2022.
• Optimum and Peak also saw significant increases in activity with 20% (Optimum) and 68% (Peak) growth of new IF charges compared to 2022.
• Specialist providers have a high proportion of recruitment / staff agencies, and are taking a bigger market share of this slightly declining market. This is indicated by a 9% growth in new IF charges compared to 2022.

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Re-factoring channels

Lloyds, RBS and Bibby saw a lot of business won by competitive lenders.

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AI allows Spark to leverage its company data and knowledge to produce market analysis, however, like any big data project, there are caveats:

Charge-holders

• This analysis is only possible where an IF charge is directly identifiable (e.g. the charge-holder is ‘XYZ Invoice Finance Limited’ or where a prediction can be made on the likelihood of the charge relating to IF – e.g. ‘XYZ Bank’ and the ‘particular_description’ follows the typical pattern for IF).
• For some lenders, it is seemingly impossible to create a strong enough pattern to match the charges to IF (e.g. Barclays Bank, Santander, etc).
• Where a group of companies has a charge, this is only counted as one for the purposes of our analysis.
• Some charges are applied to facilities for companies that never become operational, particularly common in the smaller borrower market, leading to potential discrepancies.
• ‘Phoenix’ companies funded are not treated as refactors.
• Refactors are based on IF charges. Other charges include the non-IF specific versions of ‘HSBC', 'Lloyds Bank', 'Natwest', 'Barclays Bank', 'RBS', 'Aldermore Bank', 'Santander', 'Allied Irish Bank', 'Metro Bank' and more. They are only included where the charge was satisfied within 100 days of the new IF charge or where it has been left open.

Definitions

• IF Charges: Spark prediction of what qualifies as an Invoice Finance charge, based on either the charge name, or a combination of the name and the nature of the charge.
• Region: Spark sales regions, as allocated by AI, based on either HMRC or Companies House registered address.
• Spark Size: Prediction by Spark of the size of the opportunity. This is not the risk pertaining to the business, but the potential revenue generation – from a Spark perspective, but we believe it serves as a suitable proxy for the size for a lender too.
• Spark Risk: Assessment of risk based on net assets, profitability, gearing, company age and more. This is measured 0-100 (100 = lowest risk, 0 = highest risk)risk)

Contains public sector information licensed under the Open Government Licence v3.0.