£19.4 billion of funding through asset based finance was provided for UK firms in Q4 2014, an increase of £1.6 billion on the same period a year ago. This is according to the Asset Based Finance Association (ABFA), the body representing the asset based finance industry in the UK and the Republic of Ireland.
The ABFA says that this jump in the use of invoice finance and asset based lending (borrowing against the value of the businesses other assets) is now primarily driven by businesses funding growth plans rather than replacing their use of traditional term loans or overdrafts.
Businesses are now using 38% more asset based finance than at the height of the recession in December 2009, when £14.1 billion was provided.
The speed at which asset based finance facilities can be agreed or extended makes them an ideal way for businesses to respond quickly to growth opportunities as the economy recovers.
Increasing numbers of businesses view asset based finance as an ideal option for getting their investment plans off the ground quickly, as providers offer expertise across a wide range of sectors so the lending process can be smoother and quicker than seeking traditional funding products.
Jeff Longhurst, Chief Executive of the ABFA says: “For a business looking to capitalise on growth, being able to quickly raise and deploy funds can give you a vital edge over your competitor.”
“Having in place the finance that allows you to move faster than your competitor allows you to fill orders quicker, make quicker hiring decisions, secure those new premises and take market share quicker. With invoice finance you can rapidly scale up or down the amount of money you borrow.”
80% of asset based finance is invoice finance, in which businesses secure funding against their unpaid invoices, while the other 20% represents the fast-growing area of asset based lending, in which businesses can raise money secured against a range of other assets they own, including inventory, property and machinery.