Once asset-based loans were considered a last resort for desperate businesses, but that’s no longer the case. Worldwide, asset-based lending is growing in popularity as a way for both individuals and businesses to secure short-term credit. In fact, asset-based lending is playing a significant role in many countries’ credit markets.
Asset-based lending statistics in the UK
In the UK, for example, the Asset Based Finance Association (ABFA) has reported a year-on-year increase in asset-based lending across all business sizes for the past 10 years. By the end of 2015, it reported that asset-based funding to UK and Irish businesses had reached a record high of £20 billion.
Elsewhere in Europe, asset-based lending is also rapidly gaining popularity, with notable growth especially in countries such as Germany and the Netherlands.
Asset-based lending statistics in the United States
In the United States, the Commercial Finance Association reported the total value of asset-based lending credit line commitments at the end of 2014 as nearly $216 billion – a 6.8% increase on 2013.
According to Bank Innovation, a leading American site that provides a forum for professionals in the financial services industry, “More and more business owners are realising that their needs do not fit the traditional bank line of credit form. They are turning to asset-based lending because it makes good business sense and fits their needs. Asset-based lending is a solid, flexible financial option for companies eager to grow their business.”
Asset-based lending in South Africa
Like elsewhere, asset-based lending is fast gaining ground in South Africa. Increasing numbers of asset-based lenders are joining the industry each year, and more and more cash-strapped South Africans are realising they can leverage their assets to secure fast, flexible credit.
With spiralling costs and a prediction of tough economic times ahead, it’s likely that asset-based loans will play an increasingly significant role in helping small businesses and individuals make ends meet.
Asset-based loans are filling a niche that’s not served by bank loans or traditional lines of credit. They make it possible for South Africans to obtain short-term loans even if they have poor credit records (and, according to the latest statistics, 41% of all credit-active South Africans fall in this category). They’re also much quicker and easier to obtain.
Charles Meyerowitz of Lamna noted that in the second year of Lamna’s operation, it had “grown 260% off the February base” and that the company expects “similar growth in the current financial year with compound growth in the future”.
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.