UK AND Irish businesses have turned to alternative sources of funding in the decade since the credit crunch, with invoice finance rising by more than £8bn, says new research.
There was a record high of £22.2bn of asset-based finance advanced to businesses at the end of the fourth quarter of 2016, up from £14.1bn in the first quarter of 2007, according to data compiled by the Asset Based Finance Association (ABFA), an industry trade body.
Over the same period, outstanding traditional business loans have fallen by eight per cent from £440.7bn to £406.9bn, according to the ABFA. And there has been a 31 per cent fall from £591.4bn in January 2009, as business loan books were cut sharply.
Credit from traditional lenders dried up in the wake of the financial crisis, paving the way for alternative sources of funding including invoice finance and peer-to-peer lending to fill the gap.
“Asset-based finance was a real lifeline for small businesses during the financial crisis, but it has become a driver of growth for businesses of all shapes and sizes,” said Jeff Longhurst, chief executive of the ABFA.
“For a large number of businesses, unpaid invoices are actually their biggest asset, and can be the key to unlocking the finance they need to accelerate their growth.
“While many businesses were initially drawn to invoice finance during the credit crunch, they have retained it as a key part of their funding model a decade later.
“Many bigger businesses have also looked to invoice finance to fund their acquisitions, and have moved on to using more assets than just their invoices to finance expansion.”