It’s definitely not the best of times. Banks are becoming more stringent with their lending policies, uncertainty in markets (and political dispensations) is widespread and prices continue to rise.
For small businesses and entrepreneurs, securing funding remains a critical challenge. Many don’t don’t have the credit ratings or track records to qualify for unsecured loans, like those offered by banks.
There is some light, though. Asset-based lending (ABL), once considered a last resort for businesses in need of finance, is thriving across the globe.
Asset-based finance – the way forward
In the past few years, asset-based lending has become a mainstay for businesses around the world – from the U.K. and US, to Australia and South Africa – filling the gap left by a reduction in traditional lending.
The growing popularity of asset-based finance across a broad range of industries stems from the fact that asset-based loans are quick to acquire, require no credit checks, offer flexible terms and provide the possibility of borrowing against international assets.
Asset-based lending in the U.K.
According to the Asset Based Finance Association (ABFA) – the body that represents the asset-based finance industry in the U.K. and the Republic of Ireland – the U.K. continues to lead Europe in the use of asset-based finance.
In fact, asset-based finance supports 15% of all company turnover in the U.K., and amounted to a record €29.8 billion in Q2 2016.
With the weakening of the pound sterling and increasing inflation in the wake of the Brexit referendum, this amount is set to grow steadily as more businesses turn to asset-based loans to finance their operations.
ABL statistics for the rest of Europe
Recent research shows that asset-based lending is on the rise across Europe. The total value of asset-based finance in Europe reached a record €1.47 trillion in 2015.
According to the ABFA, although most users of asset-based finance in Europe are SMEs, large businesses are also turning to ABL as an alternative form of finance. Their reports indicate that the total value of asset-based finance used by large enterprises is now roughly the same as that of SMEs in Europe.
Aside from the U.K., other major contributors to the asset-based finance market are France (17% of the European market) and Germany (14% of the European market).
The U.K. leads the pack in terms of the proportion of domestic economy supported by asset-based finance (with 26%), followed by Belgium (14.5% of the economy), the Republic of Ireland (13%), and Portugal (12%).
Asset-based lending in the United States
Asset-based lending continues to be a viable option for businesses as traditional lending criteria in the U.S. have become more stringent and an increasing number of companies need access to loans to expand globally.
According to the Commercial Finance Association, ABL credit line commitments amounted to $218.3 billion in 2015, a 7% increase on the previous year.
Asset-based lending in South Africa
Asset-rich SMEs in South Africa continue to turn to short-term, asset-based loans as an affordable alternative to traditional bank loans. Research shows that South Africa’s asset-based finance industry could now be worth as much as R1.5 billion.
The rise of cross-border asset-based lending
Asset-based lending has adapted and grown significantly over the last 20 years, as companies expand into global markets. We will see a continuation of this trend in the future, as more businesses expand their operations into new markets and use foreign assets as leverage for finance.
Getting an asset-based loan with Lamna
With Lamna, you can use a personal asset of value, from jewellery to a paid-up vehicle, to secure a short-term, asset-based loan. We don’t check credit ratings because the asset you provide serves as security, and the process is quick, convenient and confidential.
Client borrows R10,000 for 90 days.
Total Cost of Loan
Fixed rates range from 36% to 60% APR and payment options range from minimum 3 to maximum 24 months. Apart from the initiation and monthly fees shown below, the only additional fee is credit life insurance if the borrower does not have this already.