Close Brothers has found that asset-based lending is overlooked as a funding source by SMES during a survey of 900 small businesses.
Close Brothers’ research found that almost three-quarters (72%) of SMEs did not know it was possible to secure finance on the basis of their turnover, rather than their credit rating.
Almost half the SMEs in the study (44%) said they would consider asset based lending over a loan or an overdraft; just 16% of SMEs said it was their current ideal form of business finance. By contrast, two-thirds (66%) of SMEs said a bank loan or overdraft was their preferred solution.
David Thomson of Close Brothers Invoice Finance said it was crucial to ensure SMEs had a good understanding of a wide range of possible sources of funding.
“The findings of our research are disappointing because for many SMEs, asset based lending offers key benefits over other types of finance, including greater flexibility, fewer covenants, scalability and ease of access,” Thomson said. “If SMEs were better informed about how asset-based lending works, many more would put it to good use in their businesses.”
The survey found more than two-thirds of SMEs (69%) with an annual turnover of £10m or more have cash tied up in business assets such as plant, machinery, property and stock.
“Asset based lending is a source of real untapped potential for SMEs,” Thomson added. “We know that a lack of access to finance is a real barrier to growth for many businesses with huge drive and ambition, but the secret to securing this funding is often to be found in the assets the business has.”