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.

“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.”