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July 1, 2010updated 12 Apr 2017 4:22pm

IF driving economic recovery

Evette Orams, managing director of Hilton-Baird Financial Solutions, reviews the latest figuresfrom the Asset Based Finance Association and finds some positive news. If you are looking for positive proof that the economic recovery is actually impacting on the trading performance of the UKs 4.7m small and medium-sized businesses, look no further than the latest Asset Based Finance Association (ABFA) figures for the first quarter of 2010. The new industry figures show a clear rise in demand for factoring and invoice finance (IF) services compared to the first quarter of 2009 and suggest asset-based finance is equipping small- and medium-sized interprises (SMEs) with the tools they now need to seek new business and fulfil orders.

By Evette Orams

Evette Orams, managing director of Hilton-Baird Financial Solutions, reviews the latest figures from the Asset Based Finance Association and finds some positive news.

 

If you are looking for positive proof that the economic recovery is actually impacting on the trading performance of the UK’s 4.7m small and medium-sized businesses, look no further than the latest Asset Based Finance Association (ABFA) figures for the first quarter of 2010.

The new industry figures show a clear rise in demand for factoring and invoice finance (IF) services compared to the first quarter of  2009 and suggest asset-based finance is equipping small- and medium-sized interprises (SMEs) with the tools they now need to seek new business and fulfil orders.

Asset-based lending is the ideal financial solution for the recovery, as cash grows in line with turnover rather than increasing debt. ABFA’s stats show that SMEs are wising up to its potential as a strategic enabler.

Total sales from firms financed by asset based finance have increased – up £3.6bn (€4.4bn) – with client sales currently standing at £49bn, a rise of eight percent from March 2009.

 

Real improvements

This growth clearly demonstrates that SMEs using invoice finance are seeing real improvements in their business prospects – a fact borne out by Hilton-Baird’s own research showing that more than 55 percent of SMEs using invoice finance are optimistic about their growth prospects compared with 44 percent of the broader SME community.

More positive news comes from the decrease in the average debtor days invoice finance clients reported.

Against a backdrop of rising late payment, debtor days have fallen by 3.2 days for factoring clients and by 3.5 days for invoice discounting clients to 61.1 and 55.3 respectively.

In addition, export invoice discounting shows a positive rise of 15 percent indicating that UK firms are now prepared to look further afield for new business opportunities.

However, despite increased client sales, businesses remain cautious when it comes to borrowing.

Total advances through asset based finance fell by 6 percent to £14.1bn over the first quarter and advances through invoice finance fell by 2 percent. However, advances against plant and machinery actually rose by 9 percent to £63m suggesting that more manufacturers have turned to asset based finance to release cash and grow their businesses.

In terms of client numbers, the first quarter of 2010 saw a rise in clients gained of 11.7 percent when compared to the first quarter of 2009, suggesting that businesses are turning to asset-based finance facilities and asset-based lending  providers are supporting the UK’s small and medium-sized businesses in this challenging and changeable climate, helping to assist economic recovery.

 

ABFA figures, first-quarter 2010

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