'Record' number of UK firms using own assets to raise cash

Finance body claims firms are ditching traditional forms of borrowing for more creative ways of funding growth

Firms across the UK are increasingly borrowing against their own assets including inventory, plant and machinery and real estate, according to the Asset Based Finance Association (ABFA).

Known as "asset-based lending", this method of funding – using physical assets, often combined with funding against debts owed to them – is fast becoming an alternative to more traditional forms of borrowing such as term loans and overdrafts.

Because the funding is secured against assets, it can be offered at a cheaper rate than with unsecured lending.

The finance body’s latest figures reveal that an all-time high of £4.2bn of alternative business finance is secured against such assets: a nine per cent increase on the £3.8bn a year ago.

In addition, the overall amount of funding provided to businesses through asset-based finance rose by £370m in the past 12 months, standing at £19.3bn at the end of June.

Jeff Longhurst, chief executive of the ABFA, said: “The benefits of invoice finance are getting increasingly well known, but in addition to that, borrowing against hard assets is one of the innovative forms of alternative finance that has really gone mainstream in the last couple of years.”

“More and more businesses are starting to see so-called alternative finance as their primary form of funding, rather than just as an unconventional complement to traditional lending. For businesses with substantial assets tied up in warehouses, for instance, or in plant and machinery, this can be an excellent way to access lending to drive investment."

The ABFA also claimed businesses are starting to borrow against more unusual and intangible assets, including IP, and in some cases, forward income streams, as firms look at other options to unlock finance for growth.

“Innovation is also spreading fast in this industry. For example, portfolios of intellectual property can now be used to secure funding. That’s because specialist funders with expertise in valuing these assets are now joining the market in greater numbers,” Longhurst added.