News Article

Factoring & Invoice Discounting

Asset Based Lending grows during credit crunch

By CreditMan Tuesday, July 1, 2008

Asset Based Lending (ABL) has enjoyed a 50 per cent leap in popularity in the last twelve months, while interest in bank overdrafts remained static, according to an independent study of accountants by Venture Finance.

The Invoice and Asset Based Lender's study asked accountants to rate the attractiveness of various business finance options among their clients, comparing this year to 2007. The findings revealed that ABL is now attractive to more than half (52 per cent) of their business clients compared to only 2 per cent in 2007. Interest in invoice finance has also grown over the same period from 3 per cent to 29 per cent.

Peter Ewen, Managing Director, Venture Finance comments on the findings: "While the popularity of bank loans has remained static, our research supports the notion that the tightening of business credit is forcing businesses to look around for other ways of raising funds. Clearly, more can be done to educate those businesses that still prefer bank loans to the flexible benefits that invoice finance and ABL can deliver to businesses."

ABL leverages the value of a business' assets, whether they are in the form of receivables, inventory, plant and machinery, property or even brands to release working capital into the organisation. It frees businesses looking to raise capital for an acquisition or refinance from having to rely on a traditional bank overdraft or loan.

According to the Asset Based Finance Association (ABFA), the Asset Based Lending industry is developing fast with of 30 per cent growth in 2007. Venture Finance's own ABL activity supports this, achieving growth of 43 per cent during the same period (in advances against assets other than invoices).

In comparison, according to the British Banking Association, bank overdraft lending to SMEs has declined by more than half since 1992 to under £10bn.