The value of asset-based lending (ABL) has been increasing at a steady 8% to 10% per annum over the past few years, hitting £140.6bn in the first six months of 2014, according to the Asset Based Finance Association (ABFA).
“We put out $2.6bn in factoring and ABL and a similar amount in structured and leveraged finance,” says Adam Johnson, managing director at GE Capital UK. “That’s an awful lot of money and that theme continues into 2014. If anything, appetite for funding is stronger.” Volume growth has come not from an increase in the number of clients, which stood at 43,462 at the end of June 2014 compared to 41,486 at the end of June 2011, but from larger businesses.
At the end of June 2011 there were just 221 companies with turnover of more than £100m using ABL facilities. By the end of June 2014 that figure had increased to 325. Tim Hawkins is commercial director at Shawbrook Business Credit, a division of Shawbrook Bank, says: “ABFA members lend about £18bn to companies at any one time, two-thirds being to companies whose turnovers are £10m and above.
More than 40,000 companies use the product, the lion’s share coming from the ‘M’ of the SME market. Over the last 10 years, the market has evolved from factoring to invoice discounting and latterly into asset-based lending, to the extent that today you very seldom see a pure receivables-only transaction, without some additional assets as part of the mix.” Jeff Longhurst, ABFA chief executive, says: “Long term, the significant growth in volume has been seen in the funding provided for larger client businesses.
We’ve seen the bigger ticket stuff growing faster than the smaller ticket size, although the industry remains absolutely key in supporting smaller businesses. It sends out a message that asset-based finance [invoice finance and asset-based lending] has arrived, it’s an acceptable, mainstream type of finance for smaller businesses up to corporates.”
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