Statistics show continuing support for businesses while net lending has dropped, says Evette Orams, Hilton-Baird Financial Solutions

Recent statistics from the Asset Based Finance Association (ABFA) have once more demonstrated the industry’s proficiency at providing valuable support to UK businesses in these difficult times.

In marked contrast to the wider bank lending scene, which the Bank of England reports suffered a 3.2% contraction in net lending
to private non-financial corporations in the 12 months to the end of September 2012, the asset-based finance industry has continued to offer a lifeline to businesses of all sizes.

Having grown steadily since the depths of the downturn, the industry expanded by a further 3% over the same period. Advances to UK businesses by the ABFA’s members reached £16.5bn during the third quarter of 2012, the highest figure since Q4 2008.

Key to this growth was a 4% increase in the number of asset-based finance clients in the UK, which stood at 43,429 at the end of September 2012. This is the highest number recorded since the end of 2009.

While advances against debt and plant and machinery increased by 2% and 5% respectively on an annual basis, it’s interesting to note that advances against stock soared by 33% in this time.

Arguably, with business and consumer confidence at considerable lows, one of the biggest challenges facing businesses in this current climate is securing new orders. However, these statistics demonstrate that those utilising asset-based finance products are well positioned to grow their business. Also in Q3, sales of the ABFA’s members’ clients increased by 1% to £63.6bn.

Interestingly, research conducted by Hilton-Baird Financial Solutions in October 2012 echoes this data. Our latest SME Trends Index questioned more than 400 business owners and finance directors in the UK about their businesses’ performance, challenges and funding habits, and found that those using invoice finance were best equipped to grow.

For instance, while only 40% of overall respondents were able to increase their turnover in the six months to October 2012, this figure was as high as 49% for invoice finance users. Similarly, while just 29% of the total sample secured an increase in profitability over the same period, 38% of invoice finance users were able to. This trend was reflected throughout the biannual survey and demonstrates how important asset-based finance is to many businesses.

Unfortunately, given the recent negative press the industry has received, 2013 is likely to bring challenges – particularly around buyer confidence. It is important not to lose sight of the positive impact invoice finance has on the majority of its users and to ensure businesses which could profit from this source of funding are not shy of trying it
for themselves and seeing the benefits it has to offer.

Ultimately, this flexible form of funding can provide the tools required for them to prosper.

Evette Orams is managing director of Hilton-Baird Financial Solutions