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Asset-based finance booms as nervous businesses seek cash cushions?

Fred Heritage | 13 March 2017 | 7 years ago

Money and cacl
Asset-based finance grew 7 per cent in in the final quarter of 2016
The proportion of asset-based finance extended to businesses has increased by 13 per cent in the last year, according to the Asset Based Finance Association (ABFA), the industry’s representative body in the UK.

The organisation valued the UK’s asset-based finance sector at an all-time high of 22.2bn at the start of 2017, as bigger businesses increasingly use the method to fund growth activity.

Already popular amongst smaller businesses, an ABFA study revealed that asset-based finance to larger firms has increased by as much as 21 per cent since the end of 2015.

The study outlined that these businesses were using asset-based finance increasingly to supplement traditional sources of funding and moving forward with mergers and acquisitions (M&A), new projects and opportunities.

Britain’s small business owners have already demonstrated their appetite for asset-based finance, which is a special method of providing structured working capital and loans against a firm’s accounts receivable, inventory, equipment or property.

In early 2016, research form the EU Federation for Factoring and Commercial Finance found that asset-based finance supported around 15 per cent of all business turnover in Britain, compared to an average of ten per cent around Europe.

In the final three months of 2016, asset-based finance grew by as much as 7 per cent in the UK the result of business owners turning to a different source of funds to create a so-called cash cushion? in the wake of the Brexit vote and following economic uncertainty.

Some 80 per cent of asset-based finance in the UK is made up of invoice financing, whereby companies secure funds against unpaid invoices. Invoice financing accounted for 17.9bn of overall funding to businesses last year., according to ABFA.

Commenting on the statistics, ABFA’s chief executive, Jeff Longhurst, said: All sizes of UK businesses need to be aware of the possibilities and opportunities that asset-based finance can provide them beyond what traditional sources can often offer them.

asset-based finance is already well used amongst SMEs, but now larger businesses using it in innovative ways to fund their growth and M&A activity. Being able to release the value in a target company’s invoices can often be the critical factor in an acquisition.

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