The UK’s lending scene remains an underwhelming sight. Despite the presence of the Funding for Lending Scheme, bank lending to businesses continues to contract.
Though the banks themselves continue to cite a lack of demand by way of an explanation, many businesses are finding it difficult to agree with this assessment.
Similarly, the impressive growth of other funding markets surely suggests this can’t be the whole story.
While the likes of crowd funding and peer-to-peer lending have grabbed most of the positive headlines, the UK’s asset-based finance market has also continued to take on new clients and increased the volume of funding it provides.
New figures from the Asset Based Finance Association point to an impressive £16.3bn (€19.2bn) that members advanced to their clients during the first quarter of 2013 alone. This represents a year-on-year increase of 6%, while client numbers also increased, by almost 1,000.
Typically, British businesses are using asset-based finance to improve their cash flow in order to cope with and overcome widespread challenges such as restricted access to bank lending, reduced demand for their products and services and, even when new orders are secured, customers commonly paying beyond agreed credit terms.
Yet it’s important to note that this solution shouldn’t merely be regarded as a survival tactic. The market in Poland provides an intriguing case in point.
In stark contrast to the UK, the Polish economy has expanded in every year since the onset of the global financial crisis. Trade is good, demand is strong and the most common cash flow concerns for businesses stem from the difficulties experienced with trading on credit.
This has prompted growing numbers to look at invoice finance.
The market has expanded from a PLN17bn (€3.9bn) industry in 2006 to one which funded PLN100bn in 2012. Client numbers have also increased, from 1,600 to 4,700, with the number of invoices funded each year growing from 1.4 million to
Despite these contrasting pictures, the challenge for both markets is the same – how to keep growing.
Both are gradually getting the message through to businesses that asset-based finance represents a viable option to many, often a more favourable one to more traditional finance methods.
Frustratingly, this message isn’t getting through to enough businesses with few fully aware of the widespread benefits of asset-based finance, particularly in the UK, and potential is being lost.
Evette Orams is managing director of Hilton-Baird Financial Solutions