Loans backed by inventory almost double

Michael Bow
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BUSINESSES looking to borrow money are increasingly using loans secured against their inventory, with values doubling since last year, a trade body said today.

Around £880m of funds were secured this year against items such as machinery and real estate, up from £444m last year, the Asset Based Finance Association says.

“Businesses tie up billions of pounds in assets like inventory and invoices – this form of finance puts those assets to use,” ABFA chief executive Jeff Longhurst said.

“They can turn these assets from being a drain on cash flow to a tool for growth.”

Despite the increase, invoice financing – where firms borrow money secured against unpaid invoices – remains the most popular type of asset based funding arrangements, worth 78 per cent of the total.

The asset-based finance market was £18.9bn in size at the end of March 2015, rising six per cent from £17.7bn a year earlier.

Traditional lending to businesses has fallen from £383bn March 2014 to £375bn this year, according to figures from the Bank of England, opening the door to alternative forms of lending.