Record year for the IF/ABL market – but what next?

2022 saw a number of extraordinary events that must have presented a range of challenges to businesses.

Despite this, or maybe partly because of this, our invoice finance and asset-based lending (IF/ABL) members supported client businesses with a total annual turnover of over £300 billion last year for the first time ever. The sector supported £314 billion of client sales in 2022, up from £276 billion in 2021 and exceeding the previous record of £288 billion in 2018. 

The year-on-year increase was not due to a rise in the number of client businesses accessing these products. In fact, overall client numbers remained broadly stable at around 35,000 businesses, and they have yet to return to the levels seen before the pandemic and the economic interventions that followed. The increase was due to the turnover of the average client supported by IF/ABL members going from £7.9 million to £9 million, an increase of 14 percent. Bearing in mind that the official data from the Office for National Statistics indicates that UK GDP grew by four per cent in 2022, why is it that businesses supported by IF/ABL products appear to have grown more significantly than the economy as a whole?

When you look further into the figures, the reasons become clearer. The number of £10 million plus turnover businesses choosing IF/ABL products increased by over seven per cent in 2022 to 5,600 businesses. It is really encouraging to see many larger businesses turning to the flexibility provided by IF/ABL products, as the industry sees strong growth outside its SME heartland.   

Supporting SMEs has been a focus for IF/ABL providers since the industry began. In contrast to the picture for larger businesses, the number of sub-£10 million businesses the industry supported decreased slightly to just over 29,000 businesses and this raises familiar questions of supply versus demand; a similar pattern is noted across the wider commercial finance landscape. The number of new bank loans and overdraft facilities to SMEs saw a 68 percent drop in 2022 compared to 2019 (the last ‘normal’ year).

So what challenges (and opportunities) lie ahead in 2023? Early signs are that it will be another difficult year for businesses. Finance providers and advisors will have a key role to play in supporting clients and prospects to take advantage of opportunities as well as rebuilding their balance sheets as the unprecedented government interventions seen over recent years continue to roll-off.

It has rarely been so important to get the message out there about the many different and effective forms of finance that are available. IF/ABL is one of them; one that is able to support businesses large and small in almost all sectors, those that are thriving, those that are surviving and everything in between.

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