This is an increase of more than 1,500 year on year. Meanwhile, total funding available to clients grew by 4% over the same period to £23.3bn.
Often simply referred to as invoice finance, it is easy to think that the asset based finance industry exclusively involves lenders advancing funding against the value of invoices. Yet as the economic downturn has placed the financial health of businesses under increasing scrutiny, deeper analysis of the statistics highlights the ways in which the sector has evolved to enable companies to make the most of their full range of assets.
If we rewind just five years to the second quarter in 2007 – barely a month before the credit crunch began – 96% of the £14.9 billion advanced to the ABFA’s members’ clients was done so against the value of their invoices. A mere 3% was released against other assets on the balance sheet, such as stock, property, plant and machinery.
Since then however, asset based lenders have adapted their offering to ensure businesses’ requirements are met as they change. By Q2 2011, the proportion of the total advances released against debtors was down to 85%, with 15% advanced against other assets. And as businesses have recognised the benefits of accessing working capital that’s otherwise tied up, the latest ABFA figures found that almost a fifth (18%) of the £16 billion advanced to clients was secured against assets other than unpaid invoices.
Accessing funds is undeniably important to a business’s success and growth. With many companies still finding new business hard to come by, illustrated by clients’ sales plateauing at £59.5 billion between April and June, this latest growth has been fuelled by year-on-year improvements in advances against stock (27%) and plant and machinery (38%). The cash businesses gain access to as a result is therefore crucial to meeting their day-to-day commitments, achieving their objectives and driving growth.
With SMEs integral to the economy’s prospects going forward, it is promising to see the asset based finance sector being so proactive in its efforts to support this market. Yet it has also been vital to the financial health of some of the country’s largest companies, enabling businesses of all sizes to access the funding they require in these difficult times.
This flexibility is essential going forward, and other lending types would do well to follow the asset based finance industry’s example.
Evette Orams is managing director of Hilton-Baird Financial Solutions