Finance · 5 February 2016

UK breaks ground in asset-based finance

Asset-based finance n the UK is worth €189.7bn

Britain’s small businesses are leading the way in asset-based financing, with more firms using the method to fund business operations than those in Europe.

Europe-wide data published by the EU Federation for Factoring and Commercial Finance, showed that asset-based financing – such as invoice financing or asset-based lending – supported 15 per cent of UK businesses’ turnover in 2015, compared with an average of ten per cent throughout Europe.

The data showed countries like France and Germany playing catch-up with the UK in terms of the proportion of the economy supported by asset-based finance. The asset-based finance market is worth €189.7bn in the UK, whereas the value is €117.7bn in France, and €100.5bn in Germany.

Chief executive of the Association Based Finance Association (ABFA), Jeff Longhurst, said that it was encouraging to see Europe follow the UK’s lead. “Given how important EU markets are to UK businesses, what is most pleasing is that more businesses across Europe are realising the value of asset-based finance – it’s up five per cent overall – and it has cemented its position as a key alternative finance method for businesses of all sizes,” Longhurst commented.

According to ABFA, around 80 per cent of asset-based financing is invoice finance, where firms secure funding against the value of unpaid invoices. The other 20 per cent represents asset-based lending, in which businesses can raise finance against secure assets like property, machinery and inventory.

“Invoice finance has played a pivotal role in keeping funding flowing to small businesses,” added Longhurst. “UK financial services firms have long been real innovators in developing invoice finance products, and UK firms have been keen to access this funding.”

Read our expert guide to invoice financing to find out whether it could be the right option for your business.

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Fred Heritage was previously deputy editor at Business Advice. He has a BA in politics and international relations from the University of Kent and an MA in international conflict from Kings College London.

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