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Irish firms turn to asset-based finance

Friday, May 30 15:08:16

An average of E1.3bn of asset based finance was in use at any one time by nearly 2,000 Irish businesses over the past year, according to new figures released by the Asset Based Finance Association (ABFA).

The body representing the asset based finance industry in the UK and Ireland said that the figures also show that sales turnover generated by Irish companies using asset based finance for the year ending March 2014 reached E5.2bn, up 8 per cent on the same figure for 2013.

This demonstrates just how much asset based finance has supported Irish firms with vital working capital to fund their business during the period of the financial crisis and into recovery, the ABFA said.

Its figures show that 1,924 Irish companies availed of asset based finance during the year ending March 2014.

The majority of these clients registered an annual turnover of between E1m and E5m while 173 companies had sales in excess of E10m and 28 clients turned over more than E50m.

Advances to companies with sales in excess of E100million grew from E185m in Q4 2013 to E223m at Q1 2014, representing a 20 per cent increase. Advances to smaller companies with sales under E500,000 increased from E52m to E116m, demonstrating a staggering 123 per cent increase.

Eddie Brown, Chairperson of ABFA Ireland and Managing Director of Ulster Bank Invoice Finance says these figures show that invoice finance is now a mainstream funding product for businesses, playing a major role in fulfilling a SME working capital solution.

"Cash flow is the number one concern for many businesses and companies across Ireland. We are acutely aware of the difficulties that exist when it comes to maintaining a healthy cash flow but there are solutions. As trading conditions continue to place pressures on cash flow, invoice finance is a smart funding option that can release much needed cash to businesses that sell on credit terms."

"Invoice finance is playing a bigger role than ever in funding the growth of Irish businesses, and has truly stepped into the mainstream of business funding. Since the credit crunch, invoice finance has become an even more important source for SMEs for funding as they struggled to access traditional term loans. Now, as the economy recovers, more and more businesses are using it to fund their growth, and that has pushed demand for funding to levels we haven't seen before."

"Many businesses don't realise that their debtors ledger is often the most valuable asset owned by the business, and that banks and other funders will willingly lend against them. Generally speaking, loans that are not secured against assets have become harder to find over the last five years. Asset based finance has been the business funding success story of the last few years. The Government and the business community have been looking for a new mainstream financial product with the potential to fill the working capital gap created by the continued lack of term lending and these figures demonstrate that asset based finance, and invoice finance in particular, is that product," added Mr Brown

According to the ABFA, 80 per cent of asset based finance is invoice finance, in which businesses secure funding against their unpaid invoices, while the other 20 per cent represents the fast-growing area of asset based lending, in which businesses can raise money secured against a range of other assets they own, including stock, property and machinery.

The Irish members of the ABFA are AIB Commercial Finance Ltd; Bank of Ireland Commercial Finance; Bibby Financial Services (Ireland); Danske Banke A/Sand Ulster Bank Invoice Finance.