UK asset based finance in Europe

Britain at the Forefront of Asset Based Finance

The latest data released by the Asset Based Finance Association (ABFA) has shown that the UK continues to lead the European market in terms of using asset based finance. Record levels were reached across Europe and the UK in 2015 in this sector, whereby finance is secured against a business’ assets.

Invoice discounting and invoice finance as a whole, make up a large proportion of this, helping to accelerate the use of asset based finance in Britain and the wider continent. Here we look at the findings in more depth, reasons for this rise and whether the rest of Europe will continue to follow the UK’s example.

Breakdown of Asset Based Finance

Invoice discounting and other types of invoice finance make up around 80% of asset based finance, with the other 20% comprised of asset based lending. Invoice finance is therefore at the heart of this type of business finance, seeing a rise and helping British companies to push on.

The data found that the total value of asset based finance amounted to €1.47 trillion (£1.31 trillion) in 2015. Of this, the total value that supported UK businesses was €377 billion (£335 billion), representing a 7.4% increase from the year before when it amounted to €351 billion (£312 billion). In terms of market share, the UK represents 26% of asset based finance in Europe, up from 24%, compared to just 17% for France and 14% for Germany. Britain is clearly at the forefront of using asset based finance in Europe.

Reasons for the Rise

Running a small business in the post-financial crash landscape has presented many problems for start-ups and SMEs. These obstacles and various other factors have combined to see the use of asset based finance increase greatly over the past few years. Some of the main reasons for the rise are:

  • Late payments: Further research from the ABFA has also revealed that on average, SMEs in the UK have to wait 55 days for invoices to be paid. This represents a 4% increase from the previous year, as every small business has less bargaining power with clients to enforce them to pay on time, compared to larger companies. Invoice finance allows SMEs to reinvest and grow despite late payments.
  • Brexit worries: In the run-up to and in the aftermath of the UK’s referendum on EU membership, there were worries about the result’s impact on British business. Investment slowed down and a lot of uncertainty remains. This has seen a lot of SMEs struggle and need to seek out alternative finance methods.
  • Changing markets: It has become harder for banks to lend to businesses, due to a changing regulatory landscape in Europe and since the global recession. Alternative financing methods have therefore been sought out, leading to a rise in asset based finance and other such practices.

A Lesson for Europe

The use of invoice discounting and other methods of asset based finance is increasing across mainland Europe, with it achieving its highest total value in 2015. The practice holds many benefits for European businesses, allowing quick approval and access to funds, along with the flexibility attached to terms of funding. It allows them to continue growing and increase borrowing if needed, related to scaling assets.

The uncertainty that Brexit has brought, and the fluctuating value of the euro and other currencies, continues to maintain plenty of unpredictability for SMEs across Europe. Making the most of these alternative finance options could be a good solution for many, as asset based finance looks set to keep growing.

Britain at the Forefront of Asset Based Finance

The latest data released by the Asset Based Finance Association (ABFA) has shown that the UK continues to lead the European market in terms of using asset based finance. Record levels were reached across Europe and the UK in 2015 in this sector, whereby finance is secured against a business’ assets.

Invoice discounting and invoice finance as a whole, make up a large proportion of this, helping to accelerate the use of asset based finance in Britain and the wider continent. Here we look at the findings in more depth, reasons for this rise and whether the rest of Europe will continue to follow the UK’s example.

Breakdown of Asset Based Finance

Invoice discounting and other types of invoice finance make up around 80% of asset based finance, with the other 20% comprised of asset based lending. Invoice finance is therefore at the heart of this type of business finance, seeing a rise and helping British companies to push on.

The data found that the total value of asset based finance amounted to €1.47 trillion (£1.31 trillion) in 2015. Of this, the total value that supported UK businesses was €377 billion (£335 billion), representing a 7.4% increase from the year before when it amounted to €351 billion (£312 billion). In terms of market share, the UK represents 26% of asset based finance in Europe, up from 24%, compared to just 17% for France and 14% for Germany. Britain is clearly at the forefront of using asset based finance in Europe.

Reasons for the Rise

Running a small business in the post-financial crash landscape has presented many problems for start-ups and SMEs. These obstacles and various other factors have combined to see the use of asset based finance increase greatly over the past few years. Some of the main reasons for the rise are:

  • Late payments: Further research from the ABFA has also revealed that on average, SMEs in the UK have to wait 55 days for invoices to be paid. This represents a 4% increase from the previous year, as every small business has less bargaining power with clients to enforce them to pay on time, compared to larger companies. Invoice finance allows SMEs to reinvest and grow despite late payments.
  • Brexit worries: In the run-up to and in the aftermath of the UK’s referendum on EU membership, there were worries about the result’s impact on British business. Investment slowed down and a lot of uncertainty remains. This has seen a lot of SMEs struggle and need to seek out alternative finance methods.
  • Changing markets: It has become harder for banks to lend to businesses, due to a changing regulatory landscape in Europe and since the global recession. Alternative financing methods have therefore been sought out, leading to a rise in asset based finance and other such practices.

A Lesson for Europe

The use of invoice discounting and other methods of asset based finance is increasing across mainland Europe, with it achieving its highest total value in 2015. The practice holds many benefits for European businesses, allowing quick approval and access to funds, along with the flexibility attached to terms of funding. It allows them to continue growing and increase borrowing if needed, related to scaling assets.

The uncertainty that Brexit has brought, and the fluctuating value of the euro and other currencies, continues to maintain plenty of unpredictability for SMEs across Europe. Making the most of these alternative finance options could be a good solution for many, as asset based finance looks set to keep growing.

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