Asset-based lending hits record high in Q3

Amount of alternative finance on offer to UK businesses stands at £4.3bn as Brexit uncertainty continues

UK firms are capitalising on the boom in asset-based financing, propelling the amount lent out to over £4.3bn in the third quarter of 2016, up 22 per cent on the last year.

This is according to the Asset Based Finance Association (ABFA), the body that represents the invoice financing and asset-based lending industry in the UK and ROI.

The amount lent out this year so far has hit £20.7bn in total, up four per cent on the previous year's £19.9bn.

Asset-based financing works by businesses borrowing against a range of assets they already own including inventory, property, machinery and intellectual property, rather than relying on traditional loans and overdrafts.

ABFA claims that this type of lending has increased significantly in the last five years, up a whopping 71 per cent from £2.5bn in 2011, but it also warned that due to the continuing economic uncertainty resulting from Brexit, businesses could be facing longer payment delays and higher import costs due to the drop in value of sterling.

Jeff Longhurst, chief executive of ABFA, said: "Businesses continue to suffer from a lack of finance, and asset-based finance offers a real solution. There is a significant amount of capacity for even more lending through alternative finance that an increasing number of businesses are recognising as a source of funding. Asset-based lending is now a mainstay of the business finance market, and all businesses will have an asset that they can use to secure finance, including plant, machinery, and even stock."

The scheme gained more popularity after the government launched the Bank Referral Scheme, where the nine biggest banks have to pass details of businesses they are unable to support to three platforms, which allows for 'alternative' sources of finance to be offered.

Longhurst added: "With the introduction of the Bank Referral Scheme, an even larger number of businesses will recognise the options open to them and will be able to secure finance through asset-based lending and invoice finance."