Asset Based Finance Funding Assistance
The Asset Based Finance industry is a rapidly growing area of business finance and the Asset Based Finance Association wishes to support this trend by raising the awareness of these forms of flexible business finance. The Asset Based Finance industry provides Factoring, Invoice Discounting and Asset Based Lending services to a wide range of businesses.
Why Asset Based Finance?
For many companies debtor balances are the largest asset in the balance sheet. They may also turn into cash at a much slower rate than the business would like, often representing two or three months' sales.
Asset Based Finance is a generic term used to describe funding against a range of corporate assets including accounts receivable, inventory, plant and machinery, real property and sometimes even intellectual property and brands.
There are Three types of asset based finance
Factoring
Sometimes referred to as Full Service Factoring, this provides the complete answer to slow-paying customers, shortage of working capital and, if needed, protection against bad debt losses. Exporters may like to know that some of our Members have partners in overseas markets and can include export transactions in their service.
Invoice Discounting
If your business already practices sound credit management, and has the staff and systems to generate rapid customer collections, the factor's skills will not be needed. But there may still be a need to turn debtors into cash faster, and generate the maximum working capital from the sales ledger balance.
Invoice Discounting is the ideal solution to meet this need. Immediate cash is available up to 80/85% of approved invoices. However, responsibility for the sales ledger operation remains with you, and the service is normally undisclosed to customers. Payments that you receive are paid into a bank account administered by the Invoice Discounter, after which you are credited with the balance, less charges.
Asset Based Lending
The Asset Based Finance industry as a whole has gone from strength to strength in the UK and Ireland. Currently roughly 42,000 businesses are using this industry's products and services, namely Factoring, Invoice Discounting and Asset Based Lending (or ABL), to grow their businesses. However, in more recent years it is the advent of Asset Based Lending which has got everyone talking. The UK financial market often follows the lead of the market in the USA, and Asset Based Lending is no exception.
Asset Based Lending is well established in the USA and is becoming increasingly so in the UK. Asset Based Lending is when an organisation lends money to an organisation against their property, plant, machinery, stock, or sometimes even their brand name. It delivers sophisticated solutions for a variety of scenarios including growth, MBOs, MBIs, mergers and acquisitions, refinancing, turnarounds, and public to private transactions (across both a European and a global arena). It is also not uncommon for several Asset Based Lenders to work together in what is known as a 'syndication', to combine the lending power required.
Asset Based Lending is a emerging product. There are multi-million pound deals, cross border deals done, and many multi-national companies are waking up to the realisation that this is a very flexible and exciting financial product which has proven its reputation within various economic cycles.