Asset-based Finance Hits Quarterly Record in the UK

Total sales from businesses in the UK and Ireland supported by asset based finance broke £71bn in the third quarter of 2013, the strongest ever quarterly performance reports the Asset Based Finance Association (ABFA).

The association, the representative body for the asset based finance industry in the UK and Ireland, reports that the figure is 14% up on Q312. Total client turnover for 2013 to date stands at more than £202bn; with asset based financiers projected to support over £270bn of client turnover for the full year, which would represent a 6% increase on 2012’s record total.

As the third quarter of 2013 closed, ABFA members had total advances out to clients of £17.4bn, up 6% on the figure of £16.4bn. This is only the fifth time the funding balance has been above £17bn and the industry has achieved this milestone in both of the last quarters. “This demonstrates that the demand for asset based finance is strong and growing, with firms increasingly using it to fund growth and their working capital requirements,” the ABFA comments.

This contrasts markedly with the wider lending picture in the UK, where net lending overall continues to fall. Net lending to small to medium-sized enterprises (SMEs) contracted by £1.4bn in Q313 continuing its general trend throughout 2013. At a time when the wider UK economy is generally recovering with rising gross domestic product (GDP) figures and positive forecasts, firms “should be able to take advantage of new growth opportunities, not struggle to raise capital,” the ABFA adds.

The asset based finance industry continues to support smaller businesses, with almost 15,000 of the ABFA’s 43,000-plus clients having annual turnover of up to £0.5m, and over 30,000 in the sub £5m bracket. However, the data shows that asset based finance is being used by more larger businesses as well; the biggest increase in client numbers was seen in the £100m-plus turnover bracket, up 8% on the previous quarter.

Asset based financiers are most active supporting the services (30%), manufacturing (29%), distribution (24%), transport (7%) and construction (5%) sectors. The industry is reporting particularly strong demand in the services sector from the recruitment industry.

Kate Sharp, chief executive (CEO) of the ABFA, commented: “With the Organisation for Economic Co-operation and Development [OECD] revising upwards their predictions for the UK economy and stronger than expected GDP figures, the recovery is clearly well underway. The latest figures show that the asset based finance industry is playing a central part in the recovery, with record client sales figures for the last quarter and continued growth year on year in the funding balance.

“The strong demand for this type of funding from small and large companies alike is heartening; so too is the diverse sectoral split. Firms which need finance should be speaking to their funders and advisers about asset based finance as the industry can help many more firms grow and take full advantage of the economic recovery.”

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