As the money market continues to tighten,
UK businesses are increasingly turning to their assets
to release cashflow to fund business activity and growth.
The latest statistics from the Asset
Based Finance Association, the trade association for
the UK asset based finance industry, shows that members
have advanced over £15bn to 48,273 companies at
the end of the third quarter. Client numbers and sales
have grown by 11% since September 2006.
Whilst the majority of capital released
has been via outstanding invoices, the figures show that
the amount lent against other assets has increased by
one third in the last year. A large proportion of this
has been driven by a 55% increase in the funds advanced
against stock.
Correspondingly, the number of companies using asset based lending has grown
by 20% since September 2006. Stock finance has also experienced an increase
in demand of 13%.
Interestingly the quarter three results
also showed a 60% increase in the number of clients within
the transport sector turning to asset-based finance.
Another sector to increase its usage of asset-based finance
is the construction industry which witnessed a 13% jump
in client numbers in the last quarter, with numbers nearly
trebling since the same time last year.
Kate Sharp, chief executive of the
ABFA comments: The latest results give an interesting
insight into how movements in the economy are affecting
funding decisions being made by UK SMEs and large corporate
organisations
The impact of the sub-prime mortgage
crisis has meant that there is less cheap debt available
and there has been a general tightening of lending conditions.
As a result, companies are examining their balance sheets
more closely to identify where capital is tied up and
are becoming more aggressive about how they can utilise
their assets to fund the business.
Secondly, the ongoing petrol price
hikes has contributed to soaring overheads. Not surprisingly
it is companies within the transport sector that have
been hardest hit and are looking for alternative and
more flexible means of funding. Hence, our members have
seen a massive increase in the number of businesses within
this sector turning to asset-based finance.
The ABFA's third quarter results also
revealed that companies with a turnover greater than £1bn
have increased their appetite for asset-based finance
and have been advanced £3.2bn this year. This figure
increased by £456m in one quarter alone and could
be attributed to a greater number of large corporates
using asset-based finance to help finance M&As as
private equity and other forms of debt are increasingly
difficult to secure.
Other headline results from the quarter
three statistics include:
