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Keeping businesses moving through 2024 with Asset Based Lending

16-01-2024|Anthony Gougeon

And just like that, 2023 is history and 2024 promises to keep businesses on their toes with another year full of surprises including a General Election which could generate a lot of changes in both its lead up and aftermath.

Although Prime Minister Rishi Sunak declared his government triumphant on their target to halve inflation in 2023, it remains stubbornly above the  targeted 2% (it was at 3.9% in last November), and the economic outlook remains as uncertain  with the Bank of England warning of a 50/50 chance of the UK facing a recession whilst living standards very well may be lower at the end of the parliament than they were at its beginning for the first time on record.

Starting 2024 with fragile base could prove challenging, with many factors threatening to push employers and employees further into economic difficulties just around the corner. Geopolitics will play an important role in shaping worldwide economies, notably with the UK and US both facing highly contested elections, and international conflicts in Ukraine and the Middle East continuing to have repercussions for many industries and businesses in the UK.

But it is not all doom and gloom, as the road to the election could very well bring important tax changes to help secure votes after an initial cut to national insurance and tax relief on business investment back in November 2023, which could help boost the economy and the spirits of business owners.

With an unclear picture of what exactly lies ahead, it is vital that businesses both protect and equip themselves with access to liquidity to ensure they can stand against any challenge and embrace profitable opportunities that could present themselves. One sure way to do so is through asset-based lending where finance can be secured against assets via a range of solutions such as Invoice Finance, Asset Finance or Bridging Finance to name but a few.

What is asset-based lending?

Asset-based lending is a flexible and secure way of accessing funding that is tailored to the unique needs of a business, as an alternative to other forms of borrowing such as loans, overdrafts and external investment. Because the funding is accessible and secured against one or more assets, it can often provide an easier and faster way for a business to access the cash it needs to meet its ambitions. Assets are varied and include receivables (where funding is provided against invoices yet to be paid), hard assets such as vehicles, plant and machinery, and property.

Most common types of asset-based lending

Working Capital Finance

Waiting to be paid is hard on any business, and late payments can lead to cashflow disruptions which can threaten the future of a company. Working Capital Finance offers a simple way to access the funds tied up in invoices yet to be paid against a small percentage of their value to help a business keep moving with additional breathing space.

Invoice Finance, also referred to as Factoring or Discounting, sees a lender advance payment when invoices are raised to help bridge the gap until credit terms are met, which could be up to 90 or 120 days. This means that the business can instantly reinvest the funds into whatever it is that will help it achieve its ambitions, be it additional stock, new premises, or employee wages for instance.

Some lenders offer wider flexibility to their facilities, such as opting to benefit from credit control and collection services which see the lender’s team deal with collecting payments as part of the agreement, which could be ideal for smaller enterprises or businesses short on staff. Additionally, some also provide Debtor Protection, a great way to further protect a business by covering against non-payments.

Other forms of Working Capital Finance include sector specific offerings such as Recruitment Finance, which offers all the benefits of an Invoice Finance facility alongside additional services that help to outsource payroll and back-office support, Construction Finance which is tailored to work with applications for payments, or Trade Finance, which can help extend credit terms from suppliers to up to 120 days in order to maximise cashflow opportunities.

Asset Finance

Investing in the right assets can accelerate business growth, but it requires cash, and for many businesses it can mean delaying growth or taking unnecessary risks. With Asset Finance, a business no longer needs to choose between cashflow and unlocking success by acquiring key assets. Providing quick access to funding, Asset Finance solutions allow businesses to purchase or lease expensive hard assets without disruptions to cashflow by eliminating the need for full or partial payments and allowing for monthly repayments that help cashflow strategies go further. Businesses can even use existing assets to refinance against to obtain a quick and secure cash injection when an opportunity too good to pass presents itself.

Most Asset Finance lenders will fund against most hard assets such as vehicles, machinery, plant or equipment, with soft assets such as software, IT equipment or office furniture usually harder to secure funding against.

Bridging Finance

Where property is concerned, speed and access to cash usually makes all the difference. Bridging Finance, also known as Bridging Loans, is a form of short-term funding that help bridge the gap when buying or bidding for property and selling another one. They can also be used to make a first-time property investment at an auction, refurbish owned properties to increase the yield or obtain a short-term cash injection for other business purposes.

Find out more

To find out more about asset-based lending and how Ultimate Finance has helped keep businesses moving for over 20 years, get in touch with our teams today.

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If you would like to talk to us about any funding needs, call us on 0800 121 7757, register as an Introducer or request a quote for your business today