Lack of knowledge hampers asset-based lending

A study has found that almost three-quarters of UK and Irish SMEs are not aware of the ability to secure funding based on their turnover.

A new study from Close Brothers Invoice Finance suggests that small and medium-sized enterprises in the UK and Ireland are missing out on a form of lending that may suit them – because they are unaware of its existence.

The study found that 72 percent of SMEs were oblivious to the ability to secure funding based on their turnover, with 66 percent sticking to traditional forms of lending such as bank loans and overdrafts.

Only 16 percent of those canvassed were prioritising asset-based lending for their business finance even though almost half (44 percent) said they would consider it over a loan or overdraft.

The study suggests that the ignorance of asset-based lending is bad news for SMEs given that they often struggle to secure the funding they need from traditional sources.

“The findings of our research are disappointing because for many SMEs, asset based lending offers key benefits over other types of finance, including greater flexibility, fewer covenants, scalability and ease of access,” David Thomson of Close Brothers Invoice Finance said. “If SMEs were better informed about how asset based lending works, many more would put it to good use in their businesses.”

The potential missed opportunity is highlighted by the survey’s finding that more than two-thirds (69 percent) of SMEs with an annual turnover of £10 million or more have cash tied up in business assets such as plant, machinery, property and stock.

The survey was conducted in December 2016 and canvassed the opinions of 900 SME owners and business managers from several industries across the UK and Ireland.

Close Brothers Invoice Finance is a provider of invoice finance to SMEs and large businesses in the UK, Ireland and Germany.