Asset based finance is an important alternative to traditional lending solutions, and something more small and medium businesses are employing. The Finance and Lending Association (FLA) has published statistics showing its continued growth in the UK, making it the largest alternative finance option to overdrafts and bank loans in the UK SME sector.
In January 2012, asset finance new business grew by 14% compared to January 2011, valuing nearly £1.5bn. The value of new business deals up to £20million grew by nearly a quarter over the same period.
Finance for commercial vehicles increased by 23% in the first month of the year. This sector has grown year on year in each of the previous eighteen months. Growth in plant and machinery finance was in its strongest position of the past three years, with new business valuing 40% more than January 2011.
Geraldine Kilkely, Chief Economist and Head of Research at the FLA, further commented:
“Our latest finance figures follow the trend of growth in asset finance that we have seen over the past twelve months. While cash flow is important for small businesses, the evidence is that many are using asset finance to invest in new equipment and to expand their business”
Cash flow is an important problem for many small businesses, especially where funds are trapped in unpaid invoices. Asset based funding can help fund growth when traditional funding means fail – however, this will often be at a higher interest rate.
If your business needs to release funds in order to grow, other options include factoring and invoice discounting. These can free up capital from unpaid debts, giving more flexibility and room for expansion. This is a growing sector of business funding, with more and more companies in the UK looking to factoring lenders.
Microfinance options are also worth looking at. With low interest rates, these can often be an attractive alternative to traditional borrowing. However, this is still only a tiny segment of UK business funding, but with more investment and regulation this also looks set to grow.
There are plenty of options out there for businesses looking for alternative funding measures.