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Peer2Peer Finance News | September 26, 2017

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SMEs unaware they can secure finance on assets

SMEs unaware they can secure finance on assets
Marc Shoffman

ALMOST three quarters of small- and medium-sized enterprises (SMEs) are unaware they can secure finance using their assets rather than using bank loans or overdrafts.

Research by Close Brothers found 72 per cent of SMEs did not know it was possible to secure finance on the basis of their turnover, rather than their credit rating as they would when seeking bank funding.

While 44 per cent said they would consider asset based lending over a loan or an overdraft, just 16 per cent said it was their current ideal form of business finance. In contrast, two-thirds of SMEs said a bank loan or overdraft was their preferred solution.

Read more: Banks not meeting SME need for finance

The Close Brothers research suggests 69 per cent of SMEs with an annual turnover of £10m or more have cash tied up in business assets such as plant, machinery, property and stock, the study shows.

David Thomson, of Close Brothers Invoice Finance, said it was crucial to ensure SMEs had a good understanding of a wide range of possible sources of funding.

“The findings of our research are disappointing because for many SMEs, asset based lending offers key benefits over other types of finance, including greater flexibility, fewer covenants, scalability and ease of access,” Thomson said.

“If SMEs were better informed about how asset based lending works, many more would put it to good use in their businesses.”

“Asset based lending is a source of real untapped potential for SMEs. We know that a lack of access to finance is a real barrier to growth for many businesses with huge drive and ambition, but the secret to securing this funding is often to be found in the assets the business has.”

Read more: NatWest launches SME alternative lending platform
Read more: Banks tighten business lending