The number of businesses using asset finance to secure funding has reached an all-time high, according to figures released by the Asset Based Finance Association earlier this month.
The outstanding borrowing through this alternative funding option, where businesses secure loans against the value of their assets (eg machinery or equipment), had hit more than £4 billion at the end of June, a nine per cent increase against June 2014. According to recent Businesscomparison.com data, the average loan amount currently stands at £58,000, to date.
ABFA chief executive, Jeff Longhurst, explained:
“For businesses with substantial assets tied up in warehouses, for instance, or in plant and machinery, this can be an excellent way to access lending to drive investment.”
Businesscomparion.com’s data echoes this insight, showing that a fifth of all loans were to asset-heavy industries such as manufacturing and engineering, while 13 per cent were to construction and plant companies. In contrast, the IT sector was responsible for a mere four per cent of loans.
The overall growth has meant that lenders are becoming increasingly open to providing funding against a range of assets. According to Longhurst: “Innovation is spreading fast in this industry. For example, portfolios of intellectual property can now be used to secure funding. That’s because specialists with expertise in valuing these assets are now joining the market in greater numbers.”
Philip Brennan, head of Businesscomparison.com, said:
“With asset finance climbing its way through the SME world it is great to know that there is a way of spreading the cost of equipment such as machinery, or computers etc. This will help SMEs drive growth for their business, whether it’s a tight cash flow or just needing the newest version, they won’t need to lend a lump sum of cash to invest in the tools they need to grow.”