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UK small businesses turning to asset-based finance

Alternative SME finance is going from strength to strength in the UK. New figures from the Asset Based Finance Association (AFBA) show that the popularity of invoice finance continues to rise.

Q1 data from ABFA reveals another increase in the number of small businesses (those with a turnover of up to £500,000 per annum) using asset-based finance to maintain cashflow and to fund growth. While use of asset-based finance by smaller firms rose by 3% for the quarter, overall growth was higher, at 9% compared with the same three-month period in 2012.

This upturn follows similar growth reported for the last quarter of 2012 and underlines the growing role invoice finance and other forms of alternative finance are playing in providing working capital and start-up funding for small businesses in the UK. Notably, as the AFBA announced a rise in total funding provided by the asset-based finance industry (6% in March 2013, to £16.3 billion), the Bank of England has revealed a drop in bank lending to businesses.

In terms of actual numbers of companies being supported by asset-based finance, according to ABFA, the total rose by almost a thousand between Q1 2012 and Q1 2013. This increase underlines a growing awareness of asset-based finance, invoice finance and alternative finance in general, and with traditional lenders still dominating the market despite prolonged cautiousness, it seems likely that use will continue to rise in 2013 and beyond.

Following the decision to extend the Funding for Lending scheme to selected alternative finance providers and the increasing likelihood that alternative finance will feature prominently in the new British Business Bank, the latest figures from ABFA confirm the ascendency of invoice finance.

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