Invoice finance and asset based lending (IFABL) is an important type of funding for UK firms. It enables businesses to access finance against invoices due from customers, and/or to secure credit against a range of business assets such as equipment and property. These forms of finance can provide firms with improved flexibility and liquidity, unlock working capital to help them grow and invest, and also allow them to support their own suppliers by releasing cash down the supply chain.

New annual figures, published this week by UK Finance - for the first time since it took over most of the activities of the Asset Based Finance Association - show a steady increase in invoice finance and asset based lending in 2017. UK Finance members provided IFABL to 42,000 businesses at the end of 2017, worth a total of £23.4 billion in the UK and Ireland (£22.2 billion UK-only). This is up five per cent on the funds advanced at the end of 2016. Meanwhile, annual sales of clients supported by invoice finance and asset based lending stood at a record £311 billion, up four percent on 2016 (£288 billion UK-only).

Significant growth in funding has occurred amongst medium-sized and larger clients (those with annual turnovers of £10 million to £100 million). The number of clients in this category grew to 4,731 businesses, an increase of 12%, while the level of funding increasing by 20%. However, there was also a notable increase in advances provided to the very smallest clients (those with annual turnovers of less than £500,000). Advances to this cohort of clients stood at £833 million, up 19 percent year-on-year.

To a large extent, the trends within today's IFABL figures are reflected in the findings of BDRC Continental's latest independent SME Finance Monitor. This survey found that demand for external finance amongst small businesses remains limited with almost one in two being classed as Permanent Non-Borrowers in 2017, reflecting a strong sense of self-reliance amongst smaller businesses. However, echoing the trend seen amongst IFABL clients, the Monitor does find an increased appetite for finance from those businesses that are already using external funding.

Overall the Monitor finds low awareness of the wider range of finance options amongst SMEs, and going forward it will incorporate further analysis of usage and attitudes towards other forms of finance such as invoice finance and asset based lending. More work is needed to increase and improve the information available to businesses about the sources of finance that might be appropriate for them. This remains a challenge for the financial services industry, but also for public bodies and business representative groups as well.

This debate is multi-faceted and is more complicated than simply a matter of supply vs demand - confidence in future economic prospects is central, as is ever-present issue of trust in the financial services industry. UK Finance is working hard with its members and stakeholders to meet these challenges