The Growth of asset-based lending in the UK

An observable trend over the course of 2018 was a rise in asset-based lending where lenders provide capital with a client company’s assets taken as security, rather than debt. 

According to the latest figures from UK Finance, the trade association for the UK finance and banking industry, during Q2 2018 lending against assets other than invoices totalled £4.3bn, an increase of 5.6% compared with Q2 2017. Driving demand has been a spike in lending against stock, up 18% year-on-year. 

Conversely, lending against debt/invoices dipped to £17bn from £17.7bn during Q2 2017.

At a macro-level, the picture is one of peaks and troughs in advances with some consistent micro-level increases. All advances made to client companies, including both invoice/debt and asset-based, amounted to £21.4bn at the end of Q2 2018, a year-on-year fall of 1.9%. However, by the end of Q3 2018, the figure stood at £22.6bn, a 2% increase on Q3 2017.

At a more specific level, there was a rise of 1.1% in the total number of finance clients with over 40,400 companies receiving funding. Also up was the number of businesses with a turnover exceeding £10m. A 7% rise on 2017 meaning there are now over 5,000 such companies. 

Stephen Pegge, Managing Director, Head of Commercial Finance, at UK Finance, said: “It is encouraging to see steady growth in client numbers for the second consecutive quarter, with over 40,000 businesses receiving funds through invoice finance and asset-based lending.

“This is being driven partly by an increase in the number of larger businesses opting for this form of finance. We are also seeing the number of smaller clients and the funding provided to them remain steady, and the industry has the capacity and expertise to provide even more financing to these businesses in future.”