November 2007
As the money market continues to tighten,
UK businesses are increasingly turning to their assets to
release cashflow to fund business activity and growth.
The
latest statistics from the Asset Based Finance Association,
the trade association for the UK asset based finance industry,
shows that members have advanced over £15bn to 48,273
companies at the end of the third quarter. Client numbers
and sales have grown by 11% since September 2006.
Whilst the
majority of capital released has been via outstanding invoices,
the figures show that the amount lent against other
assets has increased by one third in the last year. A large
proportion of this has been driven by a 55% increase in the
funds advanced against stock.
Correspondingly, the number of companies using asset based
lending has grown by 20% since September 2006. Stock finance
has also experienced an increase in demand of 13%.
Interestingly
the quarter three results also showed a 60% increase in the
number of clients within the transport sector
turning to asset-based finance. Another sector to increase
its usage of asset-based finance is the construction industry
which witnessed a 13% jump in client numbers in the last
quarter, with numbers nearly trebling since the same time
last year.
Kate Sharp, chief executive of the ABFA
comments: The latest results give an interesting insight
into how movements
in
the economy are affecting funding decisions being made by
UK SMEs and large corporate organisations
The impact of the
sub-prime mortgage crisis has meant that there is less
cheap debt available and there has been a general
tightening of lending conditions. As a result, companies
are examining their balance sheets more closely to identify
where capital is tied up and are becoming more aggressive
about how they can utilise their assets to fund the business.
Secondly,
the ongoing petrol price hikes has contributed to soaring
overheads. Not surprisingly it is companies within
the transport sector that have been hardest hit and are looking
for alternative and more flexible means of funding. Hence,
our members have seen a massive increase in the number of
businesses within this sector turning to asset-based finance.
The
ABFA's third quarter results also revealed that companies
with a turnover greater than £1bn have increased their
appetite for asset-based finance and have been advanced £3.2bn
this year. This figure increased by £456m in one quarter
alone and could be attributed to a greater number of large
corporates using asset-based finance to help finance M&As
as private equity and other forms of debt are increasingly
difficult to secure.
Other headline results from the quarter
three statistics include:
