Research Highlights That SME Are Sitting On £770bn In Untapped Assets

Lloyds Bank Says Growth Opportunities Being Missed

12.03.2014

David Shirt, Press Officer | 0161 838 3094

According to new research published by Lloyds Bank Commercial Banking, small and medium sized businesses own £770 billion in assets and are owed £291 billion in outstanding invoices that they could use to fund future growth.
 
The report reveals that almost half are aware of invoice financing and around a third are aware of asset-based lending - but only one in 11 businesses have used invoice financing in the past 12 months. Even fewer claim to have used asset-based lending during the same period.
 
Invoice finance is designed to help businesses release cash quickly as it provides access to up to 90 per cent of the value of their issued invoices.

Asset-based lending provides cash against a company’s assets. By leveraging finance against assets such as property, plant and equipment and inventory, SMEs can use this type of finance to help their day to day operations.

Donald Kerr, managing director of Lloyds Bank Commercial Finance, said: "Our research found that more than half (52 per cent) of SMEs are more confident about investing in growth this year than they were 12 months ago.
 
"Despite this, SMEs are missing out on the opportunity to recruit new staff, break into new markets or develop new products because they are not harnessing the full range of funding options available that could unlock the value in their assets or invoices to help them grow.
 
"As a result, businesses are turning down contracts that they think they cannot afford to fund and are holding back their own growth potential.
 
"If they had access to the funds, more than a third of businesses (38 per cent) want to take on new staff, almost as many (31 per cent) to break into new markets, while more than a quarter (27 per cent) would look to develop new products.
 
"This is positive news and suggests that businesses recognise the opportunities that are out there for them in the recovery.
 
"But despite the fact that even the average SME is owed almost £60,000 in unpaid invoices - and that for one in nine (11 per cent), those outstanding bills are worth more than £200,000 - even those businesses who are aware of different finance options appear not to understand them enough to take advantage of them.
 
"Unless businesses start looking at potential solutions like these more seriously, both they and the UK's recovery overall are likely to be held back."
 

Expert Opinion
This is certainly an interesting report from Lloyds Bank Commercial Finance and with SMEs sitting on £770bn of untapped assets, it seems sensible that many smaller businesses should consider growing their businesses using asset based lending.

“Asset-based lending can offer more flexibility than more traditional bank lending such as business loans and bank overdrafts, and can be a fast, easily-accessible and cost effective way to improve cash flow.

“With SMEs being owed £291bn in outstanding invoices there is also a huge potential for SMEs to unlock cash that they could use to fund future growth through invoice discounting.

“Although many SMEs are aware of invoice discounting, few are actually using it as a type of finance. SMEs are missing out on a great opportunity to access a highly flexible form of finance which releases cash against a company’s sales ledger to bridge the cash flow gap between providing goods or a service and being paid.

“SMEs should research and consider all of their finance options and not be daunted by asset-based lending and invoice discounting as these forms of finance may provide the most suitable and sensible finance.

“As one of the leading providers of legal services to the asset-based lending sector, Irwin Mitchell understands the opportunities that present themselves from this flexible source of funding and hope more businesses in the future will look to take advantage as the economy improves.”
Jon Bew, Partner