By Martyn Freshwater, Midlands regional director, Lloyds TSB Commercial Finance

Despite ongoing economic issues at a global level, there are signs that some businesses which have ridden the financial storm are beginning to look at lending options to help fund growth.

After a couple of years where deal activity slowed down significantly, private equity houses are looking at 2012 as the year that deal flow strengthens across all sizes in the transaction spectrum.

In terms of which forms are finance are being used as part of the private equity funding mix, asset based finance  is increasingly coming to the fore for businesses due to its flexibility and scalability.

Suited to both austere and burgeoning economic climates, asset based finance allows businesses to leverage both their current and fixed assets – including receivables, property, stock, plant and machinery.

This makes it attractive to businesses which are unable or reluctant to use funding from cash reserves alone and would often prefer not to relinquish equity or take on additional senior debt.

As well as achieving significant success as a standalone form of funding, asset based finance is often a complementary addition to a wider lending structure involving other forms of debt.

Because it is linked to the value of tangible assets, asset based finance is an option which can release even more capital as a business succeeds, grows and accrues new assets such as premises or equipment.

The flexible nature of the funding means that it is used in a variety of scenarios that require strong liquidity and access to working capital, such as mergers and acquisitions, private equity buyouts, refinancing, restructuring and funding for growth, or purely as a means for companies to diversify their funding sources.

Working with the corporate finance community, asset based finance syndicates can be formed which unlock significant funding and help push deals to completion.

As part of the overall capital structure, it can offer a tailored solution for companies and transactions of all sizes – particularly important in a diverse business community such as the West Midlands, which boasts mid-market sized businesses and multi-national players keen to explore a range of funding structures to spread requirements.

Asset based finance’s popularity looks set to rise as, crucially, it frees up capital otherwise tied up physical assets or issued invoices to allow companies to be fleet of foot in an economy which is continuing to deliver opportunities for businesses which can react faster than competitors.

This can mean having the available capital to consolidate with or buy complementary businesses. Even in a cautious climate, businesses with financial flexibility have an advantage.

Over the next year we expect even more businesses to use asset based finance in conjunction with private equity backing to drive the kind of growth which is still much needed to boost business confidence in the Midlands and put the downturn behind us.