20 Mar 2020 | 09.00 am
Guest Blog: Paul Stephens, Close Brothers Commercial Finance
'For many businesses, asset-based lending gives them a commercial advantage'
20 Mar 2020 | 09.00 am
Invoice and asset finance are ideal funding options for ambitious SMEs, explains Paul Stephens (pictured), Head of Corporate & ABL at Close Brothers Commercial Finance
According to the most recent Close Brothers Business Barometer research, many senior decision-makers across Ireland and the UK remain unaware of funding options outside of traditional banking methods. In fact, just half said they are aware of invoice finance and asset finance, and one-third said the same of asset-based lending (ABL). A quarter of those asked said they aren’t aware of any of these forms of finance.
This is a lamentable finding, in my opinion. The SMEs I work with in Ireland are as ambitious as ever, and our research has found that achieving growth is the main priority for many businesses this year. Meeting funding requirements associated with this is key, and solutions like invoice discounting and ABL can be a sustainable way to reach the next level, so it is important that specialist options do not go under the radar.
Despite being well-established and trusted by those who use them, lack of knowledge and application of these types of finance can perpetuate a myth that small businesses should normally access funding through their high-street bank. However, while overdrafts and structured loans can help SMEs, other schemes can be just as appropriate, and often more flexible, because they grow in line with turnover and commercial activity.
How Asset-based Lending Works
Asset-based lending, for example, blends cash released from unpaid customer invoices with funds secured against other assets, including property, plant and machinery, and stock. This provides higher levels of funding for mid-to-large businesses, and by securing your borrowing against existing business assets we can help companies to ensure that their funding structure is manageable and has longevity.
Moreover, as ABL facilities are closely connected to the value of assets, they can provide better financial stability and more predictable cashflow. We lend against a wide range of assets, and can also augment this offering with cashflow loans for companies with a history of strong cash generation and positive forecasts, providing additional flexibility.
For many of the businesses we work with, asset-based lending gives them a commercial advantage. It’s often regarded as a strategic management tool, enabling businesses to complete acquisitions, MBOs and MBIs, as well as refinancing legacy facilities. It can also be used to provide access to additional working capital upfront, and grows in line with turnover, so it is useful for long-term application too.
As a leading provider of ABL facilities in Ireland, Close Brothers has been able to work with some of Ireland’s fastest-growing businesses, often witnessing their need for agile funding first hand.
While businesses using asset-based lending across the island are now wide-ranging, from multi-million euro manufacturers to bespoke recruitment SMEs, we know that many more could benefit. That’s why building awareness of options like asset-based lending is vital.
About Close Brothers
Close Brothers is a UK merchant banking group providing lending, deposit taking, wealth management services and securities trading. Close Brothers Group plc is listed on the London Stock Exchange and is a member of the FTSE 250. Close Brothers Commercial Finance is a trading style of Close Brothers.
Our core purpose is to help the people and businesses of Britain and Ireland thrive over the long term. To achieve this, all of our diverse, specialist businesses have a deep industry knowledge, so they can understand the challenges and opportunities that our customers and clients face. We support the unique needs of our customers and clients to ensure that they thrive, rather than simply survive, whatever the market conditions.
Visit our website to find out more: www.closecommercialfinance.ie