Banks rationing capital

With the banks rationing capital as they seek to repair their battered balance sheets liquidity has dried up, making it difficult for fundamentally sound businesses to attract new funding.

As a result small and medium sized enterprises face specific concerns. The recent explosion in asset-based lending is causing a headache for some because if businesses veer off the straight and narrow they need lenders to show understanding.

Asset-based lenders are able to be more flexible than banks because of their closer control and management of the asset base.

It is certainly not impossible to raise new money or replace existing facilities.

There is a new emphasis on solutions where cash is secured against assets, as this is seen as less risky from the lenders point of view and promises a more attractive return.

The roots of asset-based finance are invoice discounting and factoring but you can borrow against stock, plant and machinery and even I.P as part of a package or separately.

So the ‘well’ is not dry, but there is a price to be paid. In the current climate funding is likely to be expensive for businesses which have grown accustomed to easy and cheap credit, those days have gone for the time being.

Trade finance facilities generally are all available for the right deal; a professional presentation is essential, the market sector must be acceptable and finally all the basics must be available. However, management need to be realistic on pricing.