Raising Finance

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Companies using 38% more asset-based finance than at height of recession

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According to the Asset Based Finance Association (ABFA), which represents the asset-based finance industry in the UK, firms secured an all-time high of £19.4bn in funding during the last three months of 2014 – up by £1.6bn on the same period in 2013.

There is also, according to the ABFA, another £20.5bn of unused facilities agreed with businesses which they could drawdown if required.

It means that businesses are now using 38 per cent more asset-based finance than at the height of the recession in December 2009 when £14.1bn was provided.

Jeff Longhurst, chief executive of the ABFA, said the jump in the use of invoice finance, where businesses secure funding against their unpaid invoices, and asset-based lending, which involves borrowing against the value of a businesses other assets such as inventory, property and machinery, showed that it was now playing a key part in financing the recovery as the switch away from bank loans accelerates.

He said the use of asset-based finance, 80 per cent of which is dominated by invoice financing with the remainder being asset-based lending, was now being mainly driven by the need to fund growth plans rather than its more traditional use of replacing use of term loans or overdrafts.

“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 they arise as the economy recovers. With other funding products it can take months before you can get finance approved and the funds in place,” he said. “For a business looking to capitalise on a growth opportunity being able to rapidly 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.”

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It comes as challenger bank Secure Trust, majority owned by Arbuthnot Banking Group, continued to ramp up its lending to SMEs by launching an asset finance division.

Paul Marston, the bank’s head of business and commercial lending, said Secure, which last year raised £50m to fund the creation of an SME lending division, had sealed a partnership with finance company Haydock to provide the asset-based loans. “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,” Marston said.

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