Asset based finance up 13%
Asset based finance to businesses is up 13% since last year hitting an all-time high of £22.2bn, the lastest figures from the Asset Based Finance Association have found.
The figures were up £1.8bn from the £20.6bn reported in the previous year.
The ABFA said that a key driver of this rise is that the UK’s biggest businesses are increasingly turning to asset-based finance, supplementing the finance they receive from traditional sources such as overdrafts and loans, to finance new projects, growth opportunities, and M&A activity.
Large businesses have increased their usage of this type of finance by 21% in the last year, from £6.7bn to £8.1bn.
Jeff Longhurst, chief executive of the ABFA, said: “Larger businesses are increasingly using asset based finance in innovative ways to fund their growth and M&A activity.
“Asset based finance is already well used amongst SMEs, but now larger businesses are well aware of the opportunities it provides them. Bring able to release the value in a target company’s invoices can often be the critical factor in an acquisition.
“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.”
The ABFA said a major driver behind the increasing use of asset-based finance by larger businesses is its key role in funding their M&A activity. Asset based finance is now being regularly used to fund significant M&A transactions by allowing businesses to borrow against the value of the target firm’s invoices.
The ABFA added that 80% of asset-based finance is made up of invoice finance, in which businesses secure funding against their unpaid invoices. This accounted for £17.9bn of overall funding provided to businesses last year.
The other 20% represents the fast-growing area of asset based lending, in which in addition to debts, businesses can raise funding secured against a range of other assets they own, including inventory, property, and machinery.