The UK’s SMEs are increasingly reliant on their assets to raise finance, a new study has shown. Research from the Asset Based Finance Association (ABFA) issued this week shows a 7% rise in the amount borrowed against plant, machinery and other assets, with the total reaching £3.63bn. The ABFA says it’s a further sign of the growing popularity of alternative finance in the face of a tightening bank market.
A closer look at the figures reveals that around 80 per cent of asset based finance is invoice finance, in which businesses secure funding against their unpaid invoices, 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.”
According to the research, UK businesses secured £358m against plant and machinery, an increase of more than a third (37%) in a year from £261m, while there has also been an increase in the amount of business finance secured against property, with businesses borrowing £146m, 14% higher than the £128m last year.
‘Assets being used to unlock capital’
Last week the ABFA added their voice to the new Business Finance Guide, launched in order to help SMEs understand the financing options open to them as they grow.
Jeff Longhurst, chief executive of the ABFA, said: “UK businesses now have a greater understanding of how their assets can be used to unlock capital. They are successfully investing this into the growth of their business, whether that be increasing headcount or expanding their order book.”
“More businesses are benefiting from using asset based lending and securing finance to fund growth plans. Borrowing against assets has now become a more mainstream option for businesses of all sizes looking to unlock funding and fuel growth.”