Member Article

Record numbers funding growth using asset based lending

Mike Scowen, Regional Director, North West, Lloyds Bank Commercial Finance

More British businesses than ever before are turning to asset based finance to support their growth plans, according to new figures that prove the growing popularity of this previously underutilised funding source.

The latest research just released by industry body, the Asset Based Finance Association (ABFA), shows that £19.4 billion of this type of finance was provided for UK firms in quarter four of 2014.

That is a record high, up nine per cent, or £1.67 billion, on the same period in 2013, and ABFA says the bounce has primarily been driven by businesses funding growth plans rather than replacing their use of traditional term loans or overdrafts.

British firms have also agreed a further £20.5 billion of facilities that have so far not been used but that are ready to draw down as soon as they are needed.

That certainly chimes with our experience at Lloyds Bank Commercial Finance in the north west, where we have seen growing demand for our range of products that are tailored to help firms fund growth by unlocking cash tied up in assets like stock, property, machinery and issued invoices.

We know that our business customers recognise that there are more opportunities are out there for them, and while their confidence is growing they are also exploring new ways to fund their ambitions.

That has led to a growing appreciation of asset based lending and the benefits it can have over traditional products like business loans and overdrafts.

For a long time, I believe that too many businesses weren’t aware of the full range of finance options available to them, how they work and how they could quickly and simply give them the funds they needed to invest in growth.

That is no longer the case.

Today businesses are using 38 per cent more asset based facilities than at the height of the recession in December 2009, when £14.1 billion was provided.

Funding options like invoice finance, for example, can give access to up to 90 per cent of the value of issued invoices within 24 hours, while asset based lending enables firms to unlock the value tied up in stock, plant or property. ABFA says 80 per cent of this type of funding is invoice finance, while the other 20 per cent represents asset based lending.

And it says part of the appeal is the speed at which asset based finance facilities can be agreed or extended, which makes them an ideal way for businesses to respond quickly to growth opportunities which are appearing as the economy continues its recovery.

Growing numbers of entrepreneurial businesses are viewing asset based finance as the best option for getting their investment plans off the ground quickly, as asset based lending suits a wide variety of businesses in varying stages of the growth cycle.

And the fact that it is flexible and scalable means it can support your planned, strategic decisions by turning assets into cash without you having to sacrifice equity.

Many firms also find that its intrinsic link to their cashflow means it is better positioned than traditional forms of lending to grow in line with revenues, enabling their business to capitalise on growth opportunities.

Put simply, an asset based lending facility can boost levels of finance as your sales increase without the need to constantly re-negotiate terms.

Support from our teams of expert, locally-based advisers also means the lending process can also be smoother and quicker than for other financial products.

That means you can promptly make important decisions, like hiring new staff, securing new premises or making moves on new markets.

At Lloyds Bank Commercial Finance, we expect the asset based lending market to continue to grow strongly during 2015 as businesses look to expand, stabilise or refinance.

We also anticipate asset based lending will be used more with private equity funding over the next year, as businesses and private equity houses gain more confidence and understanding about its benefits.

Now, more than ever, it is crucial to have the backing of a bank that can understand the opportunities you face and help you achieve your ambitions.

This was posted in Bdaily's Members' News section by Lloyds Bank .