Raising Finance

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Businesses find new assets in the drive for expansion

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Businesses are increasingly turning to asset-based finance as a main source of funding to boost growth.

According to the Asset Based Finance Association (ABFA), the body representing the asset-based finance industry in the UK, a best-ever £4.2bn of alternative business finance is now secured against company assets such as inventory, plant, machinery and real estate.

That is up NINE per cent on the £3.8bn mark reached a year ago.

ABFA said the use of securing funding against physical assets, often combined with funding against the debts owed to them by customers, is increasingly being used by business, including large firms, as an alternative to more traditional forms of borrowing such as term loans and overdrafts from the high street banks.

Jeff Longhurst, chief executive of the ABFA, said: “The benefits of invoice finance are getting increasingly well known, but in addition to that, borrowing against hard assets is one of the innovative forms of alternative finance that has really gone mainstream in the last couple of years. More and more businesses are starting to see so-called alternative finance as their primary form of funding, rather than just as an unconventional complement to traditional lending.”

He added: “For businesses with substantial assets tied up in warehouses, for instance, or in plant and machinery, this can be an excellent way to access lending to drive investment.” 

Read more about the funding mechanism:

ABFA said that it has also seen businesses begin to borrow against more “unusual and intangible” assets, including intellectual property and sometimes forward income streams, as they explore other options to unlock finance for growth.

Longhurst said: “Innovation is also spreading fast in this industry. For example, portfolios of intellectual property can now be used to secure funding. That’s because specialist funders with expertise in valuing these assets are now joining the market in greater numbers.”

Furthermore, ABFA concluded that the overall amount of funding provided to businesses through asset-based finance – including invoice finance as well as asset based lending – rose by £370m in the past year to stand at £19.3bn at the end of June.

It said that because this funding is secured against assets, the funds can be provided at a cheaper rate than with unsecured lending.

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