As the UK landscape for SME and Corporates alike begins to stabilise following the wakeup call and shock of the pandemic; BDO have recently published an extremely interesting and inciteful analysis of the impact and subsequent influence this has had on the Asset Based Lending (ABL) and Invoice Finance (IF) sectors here in the UK; based on UK Finances IF & ABL data.
From March 2020 to June 2020 providers of both IF and ABL almost universally saw a cataclysmic reduction in utilisation across all business sizes and sector with ABL seeing a drop of almost 40% or £8.3bn in client Funds in Use. Almost 2 years later the position remains challenging but as client sales volumes grow utilisations has improved to 83% of pre-pandemic levels and encouragingly quarterly improvement had been seen through September 2020 to December 2021.
Of greater concern for the ABL sector has been the steady drop in client numbers since March 2020, 10% over the period to December 2021. Not necessarily surprising with multiple government support packages such as Bounce Back Loans, CBIL’s and most recently RLS facilities offering COVID impacted business relatively cheap finance from a large pool of rapidly approved lenders.
Although the reduction in client numbers is clearly a concern for IF and ABL providers alike, the green shoots of positive trends can be seen with improving numbers in both the Construction and Transport sector client numbers beginning to slow this process.
With this backdrop you might assume that the ABL/IF market would be retrenching and consolidating but that is far from the truth. At almost every level – from single invoice factors servicing the new start-ups and micro-SMEs, to on and off-balance sheet large ticket ABL’s servicing large corporates. We also have new entrants to the market, innovation via a new product and/or approach and a genuine appetite to help is truly evident – which is great news for SMEs and corporates alike as choice and options continue to expand.
As the economy recovers and builds post pandemic and government support via RLS reduces Invoice Finance and Asset Based Lending will continue to be an essential working capital tool to enable stabilisation, growth and expansion.
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