Asset based lending flourishes as traditional funding dries up

As traditional sources of business funding have become harder to get hold of over the last year, more and more businesses are turning to alternative sources of finance, including asset based lending.

What is Asset Based Lending?

This type of finance enables companies to borrow funds against outstanding invoices, premises, equipment, machinery and even a brand.

According to the Asset Based Finance Association (ABFA), during the first half of 2008, the industry advanced an incredible £17.8 billion against company assets - a 15% increase on the previous period.

In essence, you can borrow against pretty much anything that appears on your balance sheet. The lender then reviews each asset and assigns an interest rate to each asset and a loan-to-value ratio.

The total value of assets on the balance sheet is then pooled together and the client is offered a loan to be drawn against.

Asset Based Lending also includes Invoice Finance.

Industry Comment

Kate Sharp, chief executive officer of the ABFA, said:

“As the economy tightens securing traditional funding through banks and other financial organisations has become really difficult. As a consequence businesses are looking elsewhere for financial support.

“Companies are examining their own balance sheets more closely to identify where capital is tied up and how they can become more aggressive about utilising their assets. The format of securing outside investment is no longer possible so firms are looking within themselves to generate funding that will grow in line with their business.”

How do I get a quote?

You can compare quotes on Invoice Discounting, Factoring and Asset Finance via our partners at Simply Business.