The amount of invoice finance and asset-based lending secured by UK businesses has risen by over a quarter (27 per cent) over the last five years, up from £16 billion in 2011/12, according to the Asset Based Finance Association (ABFA), the body representing the Invoice Finance and Asset Based Lending industry in the UK and the Republic of Ireland.
This record high has been primarily driven by an 18 per cent increase in the amount drawn down by the UK’s largest businesses (with a turnover above £100 million), up from £5.8 billion in funding last year to £6.9 billion this year, adds the ABFA.
Since the credit crunch many UK businesses suffered from delays to the payment of the invoices they sent to customers and used invoice finance as a means of unlocking tied-up capital to fund growth, and since the Brexit referendum, there have been concerns that payment problems may worsen if businesses try to build up their cash cushion rather than pay suppliers, according to the organisation.
The ABFA explains that around 80 per cent of asset-based finance is invoice finance, while the other 20 per cent 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.
Jeff Longhurst, chief executive of the ABFA, says the method continues to be one of the most important sources of working capital for growth and acquisition.
‘Invoice Finance and asset-based lending are now an established part of the commercial finance market and there is increased appetite from larger UK businesses to secure funding through this route.
‘While the availability of finance from traditional sources was relatively slow to recover from the credit crunch, the asset-based finance market opened its doors to businesses and there remains significant capacity to provide more finance to more UK businesses.’
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