All-time high for asset-based finance as UK businesses go for growth
• £19.4bn of asset-based finance provided in Q4 2014, up 9% in a year
• Further £20.5bn in agreed facilities for use
Businesses in the UK received an all-time high £19.4bn of funding through asset-based finance in Q4 2014, an increase of £1.6bn on the same period a year ago, said the Asset Based Finance Association (ABFA), the body representing the asset-based finance industry in the UK and the Republic of Ireland.
The ABFA said that this jump in the use of invoice finance and asset-based lending (borrowing against the value of the businesses other assets) is now primarily driven by businesses funding growth plans rather than replacing their use of traditional term loans or overdrafts.
According to the research, businesses are now using 38% more asset-based finance than at the height of the recession in December 2009, when £14.1bn was provided.
The ABFA said that the speed at which asset-based finance facilities can be agreed or extended makes them an ideal way for businesses to respond quickly to growth opportunities arise as the economy recovers.
Jeff Longhurst, chief executive of the ABFA explains that there is also another £20.5bn of unused facilities agreed with businesses which they could drawdown if they required it.
Increasing numbers of businesses view asset-based finance as an ideal option for getting their investment plans off the ground quickly, as providers offer expertise across a wide range of sectors so the lending process can be smoother and quicker than seeking traditional funding products. As funders can use the businesses the invoices or other assets as security they are able to make swift lending decisions.
Jeff said: “For a business looking to capitalise on a growth opportunity being able to raise rapidly and deploy funds can give you a vital edge over your competitor.
“Having in place the finance that allows you to move faster than your competitor allows you to fill orders quicker, make quicker hiring decisions, secure those new premises and take market share quicker.
“So getting your request for funding approved with a rapid turnaround is really important. With invoice finance you can rapidly scale up or down the amount of money you borrow. With other funding products it can take months before you can get finance approved and the funds in place.”
80% of asset-based finance is invoice finance, in which businesses secure funding against their unpaid invoices, while the other 20% represents the fast-growing area of asset-based lending, in which businesses can raise money secured against a range of other assets they own, including inventory, property and machinery.