Asset-based finance reaches record high in UK

Tom Wright
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Asset-based finance reaches record high in UK

UK companies look for alternative to traditional funding methods as Brexit uncertainty continues

Asset-based lending hit a record UK high of £22.2bn in 2016 as businesses look to alternative methods of funding for acquisitions, according to the Asset Based Finance Association (ABFA).

ABFA claims the 13 per cent jump on 2015 lending is a result of UK businesses turning to asset-based finance, instead of more traditional sources such as bank overdrafts and loans, to finance growth and M&A activity.

ABFA said another factor in the increase was companies looking for financial security as a result of the Brexit vote.

Businesses with over £100m revenue increased their asset-based borrowing by 21 per cent year on year in 2016, it added, from £6.7bn to £8.1bn.

Jeff Longhurst, chief executive at the ABFA, said: "Larger businesses are increasingly using asset-based finance in innovative ways to fund their growth and M&A activity.

"Asset-based finance is already well used among SMEs, but now larger businesses are well aware of the opportunities it provides them. Bring able to release the value in a target company's invoices can often be the critical factor in an acquisition.

"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."

ABFA said that invoice finance made up 80 per cent of asset-backed finance in 2016 - when companies raise funds against unpaid invoices - equating to £17.9bn.

The other 20 per cent was asset-based lending, where companies can raise money secured against assets such as property, inventory and machinery.

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