Manufacturing SMEs forced to hold onto nearly £5bn in unsold stock

According to ABFA, money tied up in unsold stock is money that could have been used for business development or R&D.

The value of the unsold stock held by SME manufacturing companies has risen to £4.94 billion, putting cash flow under greater strain, according to new research commissioned by the Asset Based Finance Association (ABFA)

According to ABFA, this figure is up from £4.87 billion last year.

The value of this inventory currently amounts to 16 per cent of the £81 billion annual turnover of SME manufacturers, and many believe that the only way they can access growth finance is by moving stock quickly, which can cause issues for companies requiring finance in a short timeframe.

Money tied up in unsold stock is money that could have been used for business development or R&D, putting a brake on growth, says ABFA chief executive, Jeff Longhurst. Businesses can unlock the value tied up in their stock through asset based finance, which is in effect a type of secured lending.

Demand from businesses for this kind of alternative finance is growing, with the value of funding secured against stock by ABFA mMembers standing at £584million at the end of June – up 56 per cent over the last five years.

“SMEs are finding it hard to reduce their inventory levels as customer demand remains subdued,” Longhurst explains. “By allowing companies to access vital finance, it gives them the opportunity to invest in their business and means that growth doesn’t end up stalled by cash being tied up in unsold stock. Asset based finance can complement an invoice finance facility as well, allowing a business to improve their cash flow – which is especially important for SMEs.”

Praseeda Nair

Praseeda Nair

Praseeda was Editor for GrowthBusiness.co.uk from 2016 to 2018.

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