Evette Orams, managing director of Hilton-Baird
Financial Solutions, reviews the latest figures
from the Asset Based Finance Association and finds some positive
news.
Go deeper with GlobalData
If you are looking for positive proof
that the economic recovery is actually impacting on the trading
performance of the UK’s 4.7m small and medium-sized businesses,
look no further than the latest Asset Based Finance Association
(ABFA) figures for the first quarter of 2010.
The new industry figures show a clear rise in
demand for factoring and invoice finance (IF) services compared to
the first quarter of 2009 and suggest asset-based finance is
equipping small- and medium-sized interprises (SMEs) with the tools
they now need to seek new business and fulfil orders.
Asset-based lending is the ideal financial
solution for the recovery, as cash grows in line with turnover
rather than increasing debt. ABFA’s stats show that SMEs are wising
up to its potential as a strategic enabler.
Total sales from firms financed by asset based
finance have increased – up £3.6bn (€4.4bn) – with client sales
currently standing at £49bn, a rise of eight percent from March
2009.
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By GlobalData
Real improvements
This growth clearly demonstrates that SMEs
using invoice finance are seeing real improvements in their
business prospects – a fact borne out by Hilton-Baird’s own
research showing that more than 55 percent of SMEs using invoice
finance are optimistic about their growth prospects compared with
44 percent of the broader SME community.
More positive news comes from the decrease in
the average debtor days invoice finance clients reported.
Against a backdrop of rising late payment,
debtor days have fallen by 3.2 days for factoring clients and by
3.5 days for invoice discounting clients to 61.1 and 55.3
respectively.
In addition, export invoice discounting shows a
positive rise of 15 percent indicating that UK firms are now
prepared to look further afield for new business opportunities.
However, despite increased client sales,
businesses remain cautious when it comes to borrowing.
Total advances through asset based finance fell
by 6 percent to £14.1bn over the first quarter and advances through
invoice finance fell by 2 percent. However, advances against plant
and machinery actually rose by 9 percent to £63m suggesting that
more manufacturers have turned to asset based finance to release
cash and grow their businesses.
In terms of client numbers, the first quarter
of 2010 saw a rise in clients gained of 11.7 percent when compared
to the first quarter of 2009, suggesting that businesses are
turning to asset-based finance facilities and asset-based
lending providers are supporting the UK’s small and
medium-sized businesses in this challenging and changeable climate,
helping to assist economic recovery.
