New research by the Asset Based Finance Association shows that beleaguered firms across the UK are increasingly using asset based lending such as Invoice Factoring as a means of raising funds and capital during the credit crunch.

Asset based lending (ABL) is a form of financing that allows a business to borrow capital against its property, plant, machinery, stock and debtors. Asset Based Lenders provide products such as Invoice Factoring and discounting sale and lease back of machinery or asset refinance solutions. In ABL, lenders can share risk by forming large syndicates, or deals can be completed as a single financier.

Further Research released by the ABFA, seems that corporate sentiment remains firmly tied to the current economic downturn, with 62% of SMEs surveyed predicting it will be at least 1-2 years before the economy improves, with a further 17% believing it will take 3-4 years.

The time it takes for invoices to be paid is also extending, with average debtor days lengthening, according to the research. Twenty eight per cent of SMEs are reporting this as 40-49 days, compared to 23% reporting the more normal period of 30-39 days. The vast majority of firms are still also classifying very little of their orders as a bad debt (81%), however, significantly 9% are classifying 5-10% of their debtor books as a bad debt. This indicates that while most companies are continuing to grow and trade, external pressures are having an impact.

Small firms are also feeling hard done by when it comes to government assistance, with 33% of SMEs stating they would like to see more protection offered to them rather than larger corporations. Thirty four percent of SMEs are also keen to see a further stimulus for the housing market, suggesting that the widespread property sector crash is now not only affecting consumers but businesses too.

UK Government is trying to address the issue of availability of credit with a committee of Members of Parliament calling for the availability of Business Loans to companies to increases quickly.

Phil Orford, chief executive of the Forum for Private Business, said: “Despite this government intervention, the early indications are that small businesses are still being bracketed as risky propositions, often regardless of how well they are performing in difficult conditions.

Firms not prepared to shrivel and die with Cash Flow Problems if the banks are not prepared to extend credit terms or renew overdrafts are urged to consider Asset Based Lending and Contact Enable Finance Ltd.

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