Research finds confusing number of terms for business finance

20-Nov-2018

New research by Wyelands Bank, set up to help small and medium businesses, reveals financial service providers use too much jargon for relatively simple terms.  The research shows companies use nearly 30 different terms for just three financial products.

Receivables finance, where funding is secured against invoices, has the highest number of synonyms used with some 21 different names.

Meanwhile trade finance, which enables the purchase of goods from credit worthy buyers, has five different names.  Inventory finance, where credit is secured against stock, is the least confusing product and is given just one other name.

Iain Hunter, CEO of Wyelands Bank, said: “These relatively simple concepts do not need so much jargon around them.  Jargon is confusing.  Jargon does not differentiate through innovation, but through confusion. 

“It makes it harder for customers to understand what they are looking for or to make the right decisions about what solution to choose.  We believe the industry should apply the same definitions around each of the core products, doing more to help customers understand.”

Here is what Wyelands Bank would like to see, under the umbrella term asset-based lending and the synonyms used by companies researched: 

 

Asset-based lending is an umbrella term covering a range of products in which a funding line is secured against a combination of a business’s assets including debtors, stock, plant, machinery and property.

Our definition

Synonyms

Receivables finance

A funding facility that is secured against invoices (whether a single invoice, a block or the whole turnover) or against bills of exchange

  1. Cash flow finance
  1. CHOCCS
  1. Commercial finance
  1. Confidential invoice discounting
  1. Construction finance
  1. Contract finance
  1. Cross border finance
  1. Disclosed invoice financing
  1. Discount facilities
  1. Factoring
  1. Forward financing
  1. Inspired cashflow
  1. Invoice discounting
  1. Invoice factoring
  2. Invoice finance
  1. Payroll finance
  2. Receivables securitisation
  1. Recruitment finance
  1. Secured finance
  1. Select invoice finance
  2. Asset finance (invoice financing listed as)

Trade finance

A buyer led programme that supports the supply chain (whether on a single transaction, a block of them or on a revolving basis), enabling the purchase of goods for confirmed orders from credit worthy buyers.

  1. Purchase finance
  1. Purchase order finance
  1. Supplier finance
  1. Trade solutions
  1. Trade, import and stock finance

Inventory finance

A revolving line of credit or short-term loan that is secured against stock

  1. Stock finance

Many of the terms used are slight variations of a core product or labelled to appeal to a particular sector.

Iain Hunter continued: “Few customers have the time or expertise to pour over the subtle distinctions between seemingly similar services.  Rarely are they experts in the finance industry and nor should they have to be.

“Making it easy for firms to raise funds to trade, grow and create jobs goes to the heart of the productivity debate in the UK.  Anything that gets in the way can be detrimental to those firms and to the UK economy.

“This is why we believe financial services companies should be straightforward and easy to deal with.  This is particularly prevalent when talking about the products and services on offer.  All in our industry should share this responsibility.”

The research looked at 37 providers of working capital solutions as listed as members of the UK Finance.  We took the products names from their website.