Research shows increase in asset-based finance to businesses

Research from the Asset Based Finance Association (ABFA) has shown that asset-based finance to businesses in the UK has reached £22.2 billion, up by 13 per cent from £20.6 billion in 2016.

The research identified the key reason behind the rise, with the increase in businesses turning to asset-based finance and supplementing traditional sources of finance to help boost business growth and finance the development of new products being the main driver.

Increased

Larger businesses were found to have increased their asset-based finance usage since last year, with a rise of 21 per cent from £6.7 billion to £8.1 billion. According to the ABFA, the main reason for this increase is that more businesses are using asset-based finance to fund their merger and acquisitions activity.

More businesses are securing funding against their unpaid invoices, resulting in invoice finance now accounting for 80 per cent of asset-based finance and for £17.9 billion of overall funding to businesses in 2016.

Asset Based Lending was found to account for the other 20 per cent of asset-based finance, with businesses raising funding against assets such as property, machinery and inventory.

Opportunities

ABFA Chief Executive Jeff Longhurst commented: “Asset-based finance is already well used amongst SMEs, but now larger businesses are well aware of the opportunities it provides them.”

Longhurst said that being able to release the value in a target company’s invoices can frequently be the critical factor in an acquisition. He went on to add that businesses of every size in the UK have to be aware of the possibilities that asset-based finance is able to provide beyond what traditional sources can offer them.