Few financiers operating in today’s troubled funding market would describe 2007 as a record year, unless you’re Kate Sharp, chief executive officer of the Asset Based Finance Association (ABFA).

Few financiers operating in today’s troubled funding market would describe 2007 as a record year, unless you’re Kate Sharp, chief executive officer of the Asset Based Finance Association (ABFA).

End of year results released by the ABFA show the asset-based finance industry to be worth more than £190 billion.

Despite limited liquidity elsewhere in the debt markets, says Sharp, the asset-based finance industry has proven its resilience and shown that it can continue to grow in tough economic conditions.

Says Sharp: “Our members have proven to be a lifeline to UK companies who have experienced tightened lending conditions and needed alternative sources of funding to sustain growth.”

Last year, ABFA members advanced £15.7 billion to more than 48,000 UK companies – an increase of 16 per cent on 2006 figures – with growth being driven by large plcs turning to invoice finance and asset-based lending to fund management buy-outs, acquisitions or expansion.

As regards syndicated transactions, ABFA members were lead financiers on deals worth £1.2 billion in 2007 compared to £918 million at the same time last year.

Stock finance

With companies seeking to leverage working capital tied up in stock, the number of clients using stock finance, including ABL, grew 39 per cent. Client volumes using stock finance increased by 49 per cent in 2007, and while outstanding debtors are still the predominant assets, stock security values increased by 48 per cent.

Factoring and invoice discounting

Domestic factoring in 2007 grew 6 per cent compared to December 2006 and domestic invoice discounting saw a boost of 12 per cent. Notably, the use of export invoice discounting was bumped up by 41 per cent, a hike the ABFA believes is indicative of businesses trading overseas in an effort to dodge the slowdown in the UK. Tough market conditions and the sterling’s fall against the euro was also cited.

Retail and services drop off

The retail and services sector – perhaps the hardest hit by the credit crunch aside from financial institutions – has seen a drop in the number of clients using asset-based finance.

“I’m not surprised we’ve seen a small decline in the number companies in the retail and services sector, as it is well known that these sectors have scaled back expansion plans, but it’s not yet a cause for concern since together they account for nearly one third of our client base. Plus the drop is more than compensated for by the uplift in the number of construction and distribution clients on our members’ books,” explains Sharp.

America’s asset-based finance industry grew 12 per cent on aggregate over ten years, the ABFA points out. If the UK industry were to chart the same path, advances would flourish to more than £40 billion by 2016.