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Birmingham Post - Flexible finance feature
Jon Adams, regional director at Lloyds TSB Commercial Finance, said:
The ability to adapt quickly to market conditions and capitalise on available opportunities is essential to the success of any business in Birmingham, regardless of size or industry.
Often freeing up the funds required to drive expansion, finance an acquisition or complete a buyout can be a challenge.
Restricted cash flow frequently prevents ambitious businesses from fuelling the development needed to stay one step ahead of the competition.
Increasingly, firms in the region are releasing the value tied up in outstanding invoices, plant, machinery, stock and property by using these assets to provide the rapid cash injections needed to drive business growth.
Asset based lending (ABL) has been popular in the US for over 50 years and allows businesses to maintain a degree of flexibility not always possible with other forms of finance.
ABL, which includes factoring, invoice discounting, is now a leading source of working capital finance for UK small to medium enterprises. It enables a company to fund the high debtor and stock levels associated with expansion by unlocking the potential of the assets on its balance sheet.
This type of lending also includes hire purchase and leasing products which can be used to fund new & used vehicles, plant, machinery & office equipment.
The market has grown rapidly in recent years with figures from the Factoring and Discounting Association, the organisation responsible for asset-based lending (ABL), state that 43,000 UK businesses utilise ABL and that the sector is now worth more than £148 billion.
Most companies are finding that ABL can be tailored so that it releases the cash tied up in the business in a manner that closely matches strategic objectives and the rate and scale of expansion.
This form of finance has come to the fore as markets remain unpredictable and businesses try to maintain a degree of flexibility not always possible with loan or overdraft funding, which are invariably covenant driven.
There is also an emerging trend for businesses to use assets to fund mergers, acquisitions and management buyouts (MBOs). ABL gives access to large scale funding without having some of the restrictions senior lenders place.
There is a growing trend for companies at every stage in the lifecycle to use asset based lending as an integral part of their financing arrangements.
We work hard with management teams to structure the optimum set of facilities to provide the headroom needed to react quickly to any threats or opportunities that arise.
Asset based lenders look at the future of a business, not just the immediate past, and make commercial lending decisions based on the ability of management to make its business strategy work.
