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Tuesday 21 March 2023 Dublin: 10°C
Angry man and laptop via Shutterstock
# Desperate Times
Cash-strapped traders are turning to non-traditional lenders
SME loans taken out on unpaid invoices, stock and other assets are all on the up.

TIGHT PURSE STRINGS at the banks are making more Irish small businesses turn to non-traditional lenders.

New data from the Asset Based Finance Association (ABFA) showed the share of small businesses, those with an annual turnover of under €500,000, borrowing from the sector had gone up 40% in the last year.

During the second quarter of 2014, the amount of money advanced to companies with turnovers between €1 million and €5 million a year, which made up the largest share of borrowers, went up 13% to €324 million over the three months.

ABFA Ireland chairperson Eddie Brown said the total number of businesses turning to asset-based finance had changed little, but the amount of money they were borrowing had gone up.

We are seeing more and more businesses of all sizes and types taking advantage of invoice finance to fuel their growth, particularly as more traditional forms of lending remain subdued,” he said.

What is all this asset-based finance business?

The asset-based finance sector covers money borrowed against a business’s resources, which can mean anything from cash owed by customers, to stock in the warehouse or forecast future income.

It has traditionally been considered a last-choice option for businesses which did not qualify for traditional loans due to bad credit ratings or other stumbling blocks.

Many Small and Medium Enterprises (SMEs) complain they have been struggling to get loans from reluctant banks, despite an increase in the demand for credit.

The ABFA said invoice finance, or cash lent against unpaid accounts, was the most popular type of asset-based finance..

Brown said: “Asset based finance – particularly invoice finance – is now a realistic alternative to traditional lending for SMEs and is fast becoming a standard part of the finance suite for businesses.”

The biggest figures on many businesses’ balance sheets came from unpaid customer invoices, the ABFA said.

READ: SMEs dipping back into loans from ‘bailed out banks’

READ: Call for more scrutiny on bank lending to SMEs

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