23/07/2010
A growing number of companies are turning to asset based loans such as invoice discounting to access commercial finance, reports The Financial Times.
A study of 48 serial entrepreneurs recently conducted by Investec reveals that the use of asset based loans and mezzanine finance has grown as conventional routes to commercial finance largely closed down in the past few years. Today, over a quarter (26%) of businesses said that they were planning to use invoice discounting and other forms of asset based loans this year to secure the funds needed for their business.
Meanwhile 19% said they planned to use mezzanine finance.
According to Investec, there were five times as many enquiries about these forms of commercial finance during the first three months of 2010 in comparison with the same period last year.
Their survey also indicated that many businesses remain realistic about the prospects of securing commercial finance. Just six percent of the sample said they expected access to finance to be easy over the next 12 months, whilst the majority (64%) expected it to be difficult.
In another article in the Financial Times, William Flatau of the group First Funding explained why factoring and invoice discounting are "old favourites" of banks. "Banks love this kind of finance and the facility can be in place within days. If you have a firm order for goods but can't afford to pay the manufacturer to produce them, you can apply for trade finance," says Flatau.
William Hobson