Asset based financeBank of EnglandBibby Financial ServicesCrowdfundingFinanceFinancingFundingInvoice financeP2P lendingSMEs

Asset based funding: underused and untapped

A recent assessment from The Bank of England’s Q3 Credit Conditions report found that “credit availability for smaller firms had improved and was approaching normal levels.”

It’s fair to say that in my thirty-plus-years in the financial services industry, I have never seen so much money chasing so few business customers. Whether peer-to-peer lending and crowdfunding or traditional banking channels, SMEs are swamped with lending options.

It’s clear, however, that many SMEs don’t want to take on further debt to grow their businesses.

But even if business owners don’t want to extend credit lines further, or take on new lending, there’s a significantly untapped asset, which is much closer to hand and already owned by the business – it’s invoices.

This Autumn, the Asset Backed Finance Association (ABFA) reported that British small and medium sized businesses are owed a staggering £67.4 billion in unpaid money, a £18.9 billion increase since 2011[1]. Literally billions of pounds of potential funding is left untouched by SMEs who could be borrowing against their invoices to secure vital short-term funding.

In our SME Confidence Tracker, worryingly we are now seeing emerge an underlying hesitance and caution amongst small business owners and decision-makers. Less than half of SMEs expect their business to grow in the weeks leading up to the new year, while 16% are resisting investment to focus on building up their cash reserves.

This conservative approach extends to a focus on the upkeep and maintenance of their existing businesses, replacing broken machinery and equipment, rather than investing for growth.

But smart investment now will position a small business ahead of competitors and ready them for that next big business decision: whether that’s exporting into overseas markets, adding a product line, or hiring a new intake of skilled staff.

When funding was tight SMEs had no choice but to hold-back on growth opportunities. Now that the market is awash with capital just waiting to fund growth plans, we must encourage our small business owners to be more ambitious in their outlook in order to keep fuelling sustainable growth. Though just one option available to SMEs, it has been encouraging to see asset based finance take a higher profile in such discussions over recent months.

Right now, there is a fantastic opportunity for SMEs to reach out to secure the funding support they need, not just for day-to-day orders but for growth.

If you’re interested in finding out more about unlocking working capital, check out some of our client case studies on the Daily Telegraph website here.

Share:Share on LinkedInShare on FacebookTweet about this on TwitterShare on Google+Email this to someone