Amount of available lending against machinery and property in the UK
The amount of alternative finance available under 'asset based lending' to UK businesses reached a record high of £4.3 billion, up 22% in the last year.
This is according to the Asset Based Finance Association, the body representing the invoice finance and asset based lending industry in the UK and the Republic of Ireland.
Asset based lending allows businesses to borrow against a range of assets they already own, including inventory, property, machinery and intellectual property.
It says that this fast growing form of alternative finance is playing an important role in filling the funding gap for UK businesses, especially as economic uncertainty from the Brexit referendum continues.
The value of finance available from stock alone increased from £2.4 billion to £2.9 billion in just three months. The amount of finance made available against plant and machinery reached £1.1 billion.
The ABFA says the amount of lending made available against machinery, unsold stock, and similar hard assets has increased significantly in the last five years, rising 71% from £2.5 billion in 2011 (see chart below). Now, from the £4.3 billion currently available, businesses have drawn down £1.2 billion in new finance.
It adds that with continued economic uncertainty resulting from the Brexit referendum, businesses could face longer payment delays and higher import costs with the fall in sterling's value.
The ABFA says that businesses of all sizes are realising the opportunities in leveraging assets that can provide a continued source of working capital. Awareness of asset based finance, and initiatives such as the launch of the Government's Bank Referral Scheme. Nine of the UK's biggest banks will be required to pass on the details of businesses who they are not able to support onto three platforms where alternative sources of finance can be offered, including asset based finance.
Jeff Longhurst, Chief Executive of the ABFA, comments: continues: “With the introduction of the new Bank Referral Scheme, an even larger number of businesses will recognise the options open to them and will be able to secure finance through asset based lending and invoice finance."
The ABFA says that the total amount of asset based lending and invoice finance secured by UK businesses reached a new record high of £20.7 billion, up 4% in the past year from £19.9 billion.
It explains that around 80 percent of asset based finance is invoice finance, while the other 20 percent represents the fast-growing areas of asset based lending.
Chris St Cartmail, CEO of Business Data International, publisher of the Business Sale Report, commented “we are seeing asset based finance being used more frequently as an alternative to bank loans and overdrafts”.
He added “Whilst this is sometimes used for working capital, finance directors of companies looking to grow by acquisition are leveraging the value of their own assets and also the assets of the target company for a double injection of funds.”
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