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BASED FINANCE INDUSTRY ADVANCES £14 BILLION TO UK COMPANIES
"The tightening credit conditions caused by the sub-prime mortgage crisis,
the resulting increased corporate lending rates and the proposed tax changes in
this week’s Pre-Budget report are putting UK business under substantial pressure.
This is the time for Financial Directors and Managing Directors to review the
amount of capital they have tied up in existing assets which could provide the
liquidity needed to sustain company growth," Kate Sharp, Chief Executive
of the Asset Based Finance Association.
In the wake of the Pre-Budget Report and the credit crunch squeeze on corporate lending, the Asset Based Finance Association (ABFA) has issued statistics showing that the asset based finance industry has released much needed liquidity into the economy by advancing a staggering £14.9 billion to UK PLCs and SMEs.
Increased demand for flexible funding has seen the number of companies using asset based finance grow to 48,172 in the first half of 2007. The greatest appetite has been shown by companies turning over more than £10 million. Clients within this bracket have increased by 56 per cent since 2006 and have been advanced £6 billion.
Lending against the sales ledger continues to be the most preferred method of releasing working capital, but it is advances against other assets that is experiencing the fastest growth rate. Companies are increasingly releasing the capital locked up in plant and machinery to fund growth, with this form of asset based finance increasing by 123 per cent change since 2006.
The latest industry statistics also show movement in sector demand for products. The service industry is the sector with the highest client numbers with an increase of 19 per cent from 2006. The manufacturing sector is still buoyant as the second highest client number sector, but has only experienced a 1 per cent increase since 2006. The construction sector has witnessed a substantial increase with a 123 per cent jump in the number of companies using ABL. The retail sector still remains one of the smaller industries using these finance options, but is showing a steady increase with a 24 per cent increase since 2006. The transport and distribution sectors have reported less of an appetite for asset based finance this quarter.
Other statistics reported
include:
– 28 per cent increase in number of clients using stock finance
– 200 per cent increase in number of clients using stock finance plus asset
based lending
– Average number of debtor day has reduced from 59.3 to 59.1
for Factoring clients and 58.3 to 57.9 for discounting clients.
To view the full report on the statistics for quarter two of 2007 please click here