UK business borrowing against inventory doubles to record £880 million

The Asset Based Finance Association (ABFA), reveals that there has been particularly sharp growth in borrowing against the value of inventory, as more businesses shift away from using traditional loans and overdrafts to fund growth towards more innovative and flexible asset based finance.

Jeff Longhurst, chief executive officer of the ABFA, said: “Businesses tie up billions of pounds in assets like inventory and invoices – this form of finance puts those assets to use.

“They can turn these assets from being a drain on cash flow to a tool for growth.”

“Borrowing against the value of stock is becoming increasingly popular with bigger businesses that carry high levels of inventory. Rather than simply tying up cash, inventory can be used to unlock funds.”

“For these businesses, borrowing against inventory makes a huge amount of sense. They can get a quick decision from their funder, enabling them to purchase new equipment to increase sales or invest in the next round of product development.”

Use of asset based finance up 6% in a year to £18.9 billion

UK businesses were using a total of £18.9 billion of asset based finance at the end of March 2015, up 6% year on year from £17.7 billion in March 2014.

The ABFA says that invoice finance, where businesses borrow against the value of their unpaid invoices, remains the most popular form of asset based finance with businesses, accounting for 78% of the total.

Longhurst added: “Invoice finance has for many years now been an established alternative to traditional lending products for business looking to fund their growth, and these figures show that appetite from businesses remains strong.”

“It is now a truly mainstream finance choice, and one used by a huge number of growing businesses as part of a balanced approach to their funding.”

At the same time, figures from the Bank of England show that outstanding traditional lending to businesses fell to £375 billion at the end of March this year from £383 billion in March 2014 (see graph below).

Business borrowing against value of inventory doubles in a year…

…while traditional lending to businesses drops another 2% in a year and 32% since 2010

*All data as at 31 March