SMEs lack awareness of asset based lending options

The UK’s small businesses possess a startling lack of knowledge about their alternative financial options, according to new research.

In particular, the study by Close Brothers found a lack of understanding around asset based lending and its benefits.

This funding option could provide small and medium sized businesses with an alternative to either inflexible or unobtainable finance options that could be available elsewhere.

Nearly three quarters of businesses revealed that they were unaware that they could secure finance based on their turnover, rather than their credit rating.

Meanwhile, 44% of those questioned said that asset based lending would therefore be a viable option over an overdraft or loan – but despite this, the majority of businesses are not taking action.

Just 16% listed asset based lending as their preferable form of business finance, compared to two thirds who opt for overdrafts and bank loans as their main financial option.

For SMEs that are attempting to refinance to drive growth, the results highlight that there are a wider array of options than most may consider.

Given that a lack of access to quality funding could hinder growth plans or prevent a firm from reaching its potential, small businesses need to ensure that they are aware of, and understand, the options available to them.

For a business trying to explore innovative methods of raising finance, it is important to assess the alternative finance options that may be available and to put together adequate proposals.

A failure to do this may result in proposals being rejected, or certain opportunities being overlooked entirely – as is suggested by the latest data.

Asset based finance, for example, could offer scalability, improved flexibility and easier access than a range of other types of finance.

The key for all businesses is to understand their options and to not discount any form of finance without prior consideration – that way they should be able to unlock more of their potential.

By Phil Smith

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