Byline: Gavin Stewart
Every year, the Asset Based Finance Association (ABFA) announces the official statistics for the invoice finance industry. However, what do they actually mean from an accountant's point of view? What do the statistics tell us in simple terms when discussing the industry in 2010 compared to 2009? Well, hopefully this article will provide some insight... The UK market showed growth in both factoring and invoice discounting of approximately 10 per cent with over 41,000 businesses using invoice finance facilities.
Businesses with a turnover of between 0-pounds 5 millon were the biggest users of invoice finance, representing 84 per cent of the total market.
The total number of advances reached a staggering pounds 15 billion with clear growth in payments against plant and machinery and stock, 88 per cent and 21 per cent respectively.
Export funding increased by 35 per cent compared to 2009, which is in line with the current trend in the UK market * Reduction of 30 per cent in credit protection being taken by clients mainly due to lack of insurance backed position for many customers in this climate. * Increase shown in advances against plant and machinery of 88 per cent signifying the flexibility of the ABL facilities now being made available as an adjunct to debtors as the main security. * Overall fall in number of clients using asset based lending by 5 per cent although clients lost and clients gained in final quarter of 2010 are fairly neutral.
The present climate and the lack of appetite by banks to lend have and will subsequently increase the use of factoring and invoice discounting. Our own business finance team witnessed a 60 per cent increase in the volume of invoice finance enquiries in the last six months alone compared to the same period in 2010.
Therefore, in summary, the above would indicate that asset based lending is a growing market which is open for business as a source of finance particularly in this economic climate where the banks are often struggling to be in a position to back every deal.
This in itself has created an opportunity for increased rates to be earned by the ABLs with the independents closing the gap in terms of margin over the main clearers. …