According to the challenger bank, led by former RBS executive Paul Lynam: “Our business and commercial division is now able to offer SMEs a full suite of solutions to achieve the funding their business needs to grow. Secure Trust provides SMEs with an offering that is unmatched by high street lenders. Our customers are able to benefit from fast decision-making and transfer of funds along with local advisors – as well as the support of a major financial institution.”The move comes as small businesses increasingly borrow against assets as they struggle to secure loans from banks. Asset-based finance loans rose to more than £25bn last year. The Asset Based Finance Association has reported an increase of over ten per cent in terms of funds out over the last year alone. The official figures show that lending to SMEs by the traditional high street banks has fallen, highlighting the increasing role of specialist finance providers in filling the funding gap. According to research from BDRC, 30 per cent of SMEs were using finance facilities such as overdrafts in Q2 2014 compared to 36 per cent in the same quarter of 2012. At its peak, four in ten SMEs were using these products. Stephen Hodges, CEO of Close Brothers’ banking division, is a long time advocate of asset finance rather than overdrafts for SMEs. Asset finance is a loan that is secured against some or all of the assets of the company. This is often machinery and equipment or other tangible assets, but it is also possible to borrow against stock, property, or accounts receivable. Companies can even borrow against future cash flow. “I believe that too many SMEs rely on bank overdrafts. Instead they need to be thinking about alternative sources of finance,” he said. “Overdrafts are a poor way for SMEs to borrow money. Banks can pull a loan ‘on demand’, without any notice, leaving companies with little or no time to find the means to repay them. And SMEs often find that overdrafts are insufficient to meet the cost of the new machine tools or vehicles that are needed to fulfil the big new contract.” Read more about asset finance:
- Asset financing: A real opportunity for Funding for Lending?
- Companies using 38% more asset-based finance than at the height of recession
- Considering seed funding? Have a look at your invoices instead
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