News Article

Asset Based Lending

UK200Group member comments on the rise of invoice financing and asset-backed lending to SMEs

By CreditMan Monday, December 7, 2015

A member of the UK200Group of independent accountancy and law firms has today commented on news that SMEs in the UK and Ireland have borrowed £16 billion against unpaid invoices, according to the Asset Based Finance Association (ABFA). Firms have also borrowed £4 billion against property, stock, machinery and intellectual property. The £20 billion total in asset-backed lending is up four cent on this time last year.

Duncan Montgomery, Tax Partner at UK200Group member firm Whittingham Riddell:

The rise in asset-backed lending and invoice financing has been seen in many businesses, and while it is popular, it does have issues if a business does not monitor the ageing of debt properly for invoice financing. If done well it can instil good credit control procedures and generate benefits for a business. Where it can fall down is where collection of cash itself is outsourced to a third party through disclosed invoice discounting. Where a business relies on the personal touch to generate custom, email requests and threatening letters for payments one day overdue can crop up, and while they may stimulate payment, they are capable of losing customers gained through pleasant service. It is important to choose the right provider for this.