Record-breaking asset based finance sector supports 15% of UK turnover

10/02/2016

New figures have revealed that the UK’s asset based finance industry is leading Europe in its support for businesses.

Its trade body, the Asset Based Finance Association (ABFA), says the likes of invoice finance, factoring and asset based lending now supports an impressive 15% of all UK company turnover – a third higher than the European average.

This follows the news that the asset based finance industry continues to break records in the UK, with businesses securing £20 billion through asset based finance for the first time ever in Q3 2015, up 4% from £19.3 billion in the previous year.

Around 80% of asset based finance is provided through invoice finance, where companies can secure funding against their unpaid invoices, while the other 20% represents the fast-growing area of asset based lending, in which businesses can raise funding secured against a range of other assets they own, including stock, property and machinery.

Jeff Longhurst, Chief Executive of the ABFA, said: “UK financial services firms have long been real innovators in developing invoice finance products, and businesses in the UK have traditionally been keen to access this funding. Now the rest of Europe is also following suit.

“Invoice finance has played a pivotal role in keeping funding flowing to SMEs as more businesses look to complement or replace traditional bank lending with asset based finance.

“Given how important EU markets are to UK businesses, perhaps what is most encouraging is that more businesses across Europe are realising the value of asset based finance – it’s up 5% overall – and it has cemented its position as a key alternative source of funding for businesses of all sizes.”

A stark contrast

In the wake of the financial crisis, so-called alternative methods of finance such as asset based finance grew in popularity as they adapted to the fast-changing needs of businesses. But there are still areas of the commercial finance market that must still improve to help small businesses get access to the funding that’s vital for their growth.

Indeed, a report from British Business Bank showed that a number of challenges remain, including uneven support for growing SMEs across the UK and not enough diversity in the small business finance market.

New figures from the Bank of England, meanwhile, suggest that loans to UK businesses fell by £3.7 billion in December – much worse than the average monthly decline of £300 million seen over the previous six months.

Keith Morgan, CEO of British Business Bank, said: “Our second Small Business Finance Markets report reveals the complex picture of the current landscape for finance to smaller business in the UK. While there are encouraging signs that volumes are up and alternative finance markets are thriving, there remain areas that still require attention.”

This highlights the importance for businesses to explore all of the options available when searching for business finance.

Our free guide to funding products explores the advantages and disadvantages of some of the most popular funding options to help you determine which products are most suitable for your business’s requirements.

If you’d rather talk through your options with a member of our expert team, or find out if asset based finance is right for your business, you can contact us on 0800 9774833 or info@hiltonbaird.co.uk.