Asset based finance in the UK and Ireland rose 12% year-on-year in 2016 to reach a record of £22.2bn (€25.4bn), according to the Asset Based Finance Association (ABFA).

The amount of asset based finance to large businesses rose 21% from £6.7bn to £8.1bn over the same period.

The ABFA claims this type of finance is increasingly used for mergers and acquisitions (M&A) activity, by businesses borrowing against the value of the invoices held by the target firm.

Jeff Longhurst, chief executive of the ABFA, said: “Being able to release the value in a target company’s invoices can often be the critical factor in an acquisition.”

The majority, 80%, of asset-based finance consists of invoice finance, accounting for £17.9bn of business funding in 2016 according to the ABFA, while asset-based lending was responsible for the remaining 20%.

Longhurst added: “Asset based finance is already well used among SMEs, but now larger businesses are well aware of the opportunities it provides them.

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“All sizes of UK businesses need to be aware of the possibilities and opportunities that asset based finance can provide them beyond what traditional sources can often offer them.”