The Asset Based Finance Association (ABFA) has mentioned that UK companies are increasingly turning to use their assets to raise money.
Asset-backed lending can be combined with other fundraising techniques, as we at DJB are aware. It has become increasingly popular since traditional types of lending, like overdrafts and loans, have become harder to get in some circumstances. Using assets in this manner has reportedly been cost-effective in terms of rates when compared with unsecured lending.
The chief executive for ABFA, Jeff Longhurst, has explained:
“The benefits of invoice finance are getting increasingly well known, but in addition to that, borrowing against hard assets is one of the innovative forms of alternative finance that has really gone mainstream in the last couple of years.”
Longhurst has noted that this approach to finance suits some businesses better than others. In particular, he has stressed the advantages that can be obtained by enterprises with significant amounts of machinery, plant and warehouses.
However, ABFA has asserted that companies have started to raise money by borrowing against different types of assets. This has meant that they have been able to get access to funds on the back of intangible entities like intellectual property, thus facilitating their pursuit of growth.
This kind of innovation in the sector has not happened automatically; Longhurst has explained that the raising of finance on intellectual property portfolios has been made possible by specialist providers of funds. These organisations have the expertise necessary to assess the value of the assets in question.