News

June 07, 2013

Asset financing up as lending scheme flounders

Increasing numbers of smaller firms are using invoice financing against a backdrop of some tentative signs of economic recovery, according to new figures from the Asset Based Finance Association (ABFA).

The ABFA's figures show a 3% rise in the number of smaller firms using asset-based finance between Q4 2012 and Q1 2013. In total over 15,000 of the smallest businesses in the UK and Ireland are supported by asset-based finance, using it for working capital and to fund growth – the highest figure for nearly three years.

Kate Sharp, chief executive of the Asset Based Finance Association, said: "Having recently surveyed accountants we know they say that access to funding is still a major issue for their clients. With some signs of confidence returning it becomes ever more important that firms can take advantage of the new opportunities that growth presents."

At the same time, research by the ABFA finds that most business owners are confused about funding. In a survey of over 2,000 financial advisers, 80% of respondents said the biggest challenge their clients face today is the removal or restriction of traditional forms of finance. And 66% said business owners have a poor understanding of the funding options open to them.

These findings come just as there is further bad news from the Bank of England on the Funding for Lending scheme (FLS). It found that net lending by FLS participants over the first quarter of 2013 was down by £0.3bn.

Commenting on the decline in lending, Phil Orford, chief executive of the Forum of Private Businesses, said: "These figures will be another disappointment to small firms, particularly after the recent tweaks to the government scheme. The Funding for Lending scheme has supported the supply side, most noticeably with mortgage lending which has led to an improvement in demand. It is now imperative that the major banks focus on delivering the same successful formula to businesses with innovative and attractive products."