Asset based finance industry bullish about the outlook for 2015
The amount of invoice finance and other asset based finance provided to UK and Irish businesses is forecast to soar past the £20bn level in 2015, according to the Asset Based Finance Association (ABFA), the body representing the asset based finance industry in the UK and the Republic of Ireland.
The ABFA’s Annual Confidence Survey of its membership reveals that a record high of £20.8bn is forecast to be advanced to businesses at the end of the year, up from £19.4bn in December 2014, itself an all-time high.
80% of this funding is expected to be provided through invoice finance, where businesses secure funding against the value of their unpaid invoices. The other 20% is expected to be delivered through wider asset based lending packages, where businesses secure funding against a range of assets they already own, such as stock, machinery or property, as well as against debt.
Jeff Longhurst, chief executive officer, ABFA said: “Invoice finance and asset based lending are in pole position to become a leading alternative to traditional loans. That is great news for businesses. These are now established products that can support even more businesses, allowing them to unlock funding to pursue growth opportunities.”
According to the ABFA the advantages of asset based finance include:
– Quick turnaround – as the funding is secured against invoices or other assets, funders can make quick decisions and provide almost immediate funding
– Scalable – funding can increase as the company and its order book grows
– Flexible – can be used in numerous scenarios, such as to fund organic growth, turnarounds and acquisitions
– Low stress and improved cashflow – helps to resolve the problem of slow payment from customers and can even help manage the risks of bad debts
ABFA Members are also bullish about the number of businesses that will use asset based finance in 2015. Particular growth is expected in asset based lending, with ABFA Members predicting client numbers to increase by over 20%. Numbers of invoice finance users are expected to increase more modestly by around 8%.
Jeff Longhurst said: “Invoice finance is already widely recognised by firms as a quick and straightforward way to leverage the underlying strength of their business, unlocking funding to grow.
“SMEs in particular are seeing the value of converting their unpaid invoices into ready capital for investment, whether they need to hire new sales staff, expand their premises, buy new tools and equipment or focus on R&D.
“Asset based lending is also rapidly growing in popularity with companies of all sizes, as they see the benefits of using the value of their inventory, equipment and other property as security – that security allows them to access business finance they might not otherwise have got.”
ABFA Members are also confident about the general economic outlook; three-quarters of respondents (73%) said they expect economic conditions to improve over the next 12 months, with the remaining 27% forecasting that the outlook will remain stable.