As businesses continue to look for alternative methods of raising capital, £9.5bn was lent to SMEs via asset finance last year, up 3% on the year before.
This is in stark contrast to the 2% decrease in the number of businesses using bank overdrafts in 2016.
With a number of high street banks reluctant to lend to smaller businesses or start-up firms, a growing amount are looking to asset-based finance, enabling them to secure finance for a variety of assets, ranging from everything from business vehicles to less tangible assets such as IT software.
Asset finance is a much more flexible choice than a bank overdraft, with options ranging from help with new purchases, refinancing existing assets to raise cash or invoice discounting.
Invoice finance or discounting is secured against the value of unpaid invoices and is one of the most widely used forms of asset finance.
Unlocking capital in this way means that SMEs can have the means to purchase new equipment in a shorter period of time than if they were to wait for the usual invoice process.
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Jeff Longhurst, chief executive of the ABFA, said: “While bank overdrafts can be withdrawn at short notice if companies are deemed no longer to need them, for instance during peaks in business, asset-based finance is a longer-term option, making it easier for companies to plan for the future.”
For more information on how asset-based finance could help your business, get in touch with one of our experts who will be able to provide you with the information and help that you need to ensure that your business can take that next step.