Asset based finance (ABF) supports businesses representing 15 per cent of the UK’s economy, ahead of an average of 10 per cent of the economy across Europe, according to the Asset Based Finance Association (ABFA), the body representing the invoice finance and asset based lending industry in the UK and the Republic of Ireland.
Despite relatively strong growth amongst businesses using asset based finance in France and Germany, both lag behind the UK in both the proportion of the economy supported by asset based finance and absolute terms (UK: 15% and €189.7bn; France: 11 per cent and €117.7bn; Germany: 7% and €100.5bn).
ABFA explains that around 80 per cent of asset based finance is invoice finance, in which businesses secure funding against their unpaid invoices, while the other 20 per cent represents the fast-growing area of asset based lending, in which businesses can raise funding secured against a range of other assets they own, including inventory, property and machinery.
Aside from the UK, the top three European countries in terms of proportion of the economy supported by asset based finance are:
- Belgium – 14.5% of economy (€29.3bn)
- Republic of Ireland – 13% of economy (€12.7bn)
- Portugal – 12% of economy (€10.4bn)
Jeff Longhurst, chief executive of the ABFA, said: “UK financial services firms have long been real innovators in developing invoice finance products, and businesses in the UK have traditionally been keen to access this funding. Now the rest of Europe is also following suit.
“Invoice finance has played a pivotal role in keeping funding flowing to SMEs as more businesses look to complement or replace traditional bank lending with asset based finance. Given how important EU markets are to UK businesses, perhaps what is most encouraging is that more businesses across Europe are realising the value of asset based finance – it’s up 5 per cent overall – and it has cemented its position as a key alternative source of funding for businesses of all sizes.”
According to statistics from the ABFA, Q3 2015 saw the use of asset based finance in the UK and Ireland hit a record high, with businesses securing £20bn through asset based finance for the first time ever, up 4 per cent from £19.3bn in the previous year.