Asset based finance to businesses jumps 13% in a year to £22.2 billion

Asset based finance continues to grow with a 13% increase since last year, hitting an all-time high of £22.2 billion, rising from £20.6 billion the previous year according to the latest statistics from the Association of British Factors and Discounters (The ABFA).

A key driver of this rise is that the UK’s biggest businesses are increasingly turning to asset-based finance, supplementing the finance they receive from traditional sources such as overdrafts and loans, to finance new projects, growth opportunities, and M&A activity.

Asset based finance has grown by 7% in the last quarter of 2016, up from £20.6 billion which can be attributed to financial instability following the Brexit vote, that has meant businesses are turning to this type of finance in order to create a ‘cash cushion’.

80% of asset-based finance is made up of invoice finance, in which businesses secure funding against their unpaid invoices. This accounted for £17.9 billion of overall funding provided to businesses last year. The remaining 20% represents funding secured against a range of other assets they own, including inventory, property, and machinery.

Toni Dare, managing director of Pulse Cashflow comments: “It is really encouraging to see that UK businesses are still relying on asset based finance to fund their business growth. Having well-earned cash tied up in unpaid invoices is a waste of resources which could be better deployed to support business growth plans.