Pictured above: Barry Doherty

The region's manufacturing firms have moved away from traditional lending arrangements to embrace asset based lending, according to a corporate lawyer based in Birmingham.

Barry Doherty, corporate partner at the Birmingham office of law firm Weightmans LLP, says that from asset based lending such as invoice finance, manufacturing firms are accessing the cash tied up in their debtor ledger and inventories to fund working capital growth - and in some cases this is even helping to fund acquisitions.

Figures released by the Asset Based Finance Association earlier this month revealed that invoice finance lending had grown by 8% as SMEs borrowed £14.9bn from members of the Association.

The total was a £1bn increase on the number of invoice finance loans issued in 2009, whilst the turnover from UK firms using invoice finance grew by 12% in the fourth quarter of 2010. The manufacturing sector used invoice finance the most, accounting for 31% of the total number of businesses pursuing this funding route.

Barry says:

"With the banks still slow to lend through the more traditional routes, the onus is on companies to go out into market and drum up finance from alternative sources."

"Invoice finance and asset based lending is on the rise and, in my view, will continue to be so throughout 2011; especially amongst manufacturers that have expensive machinery to stand as valid security."

Barry explains that asset based lending offers an opportunity to make future growth dreams a reality for those manufacturers performing well in the current market.

"A secure business with an asset rich balance sheet will benefit from such finance when considering a takeover," he says. "It is proving to be a popular and efficient form of borrowing as the business can obtain access to chunks of finance as and when needed and the funding can be raised quickly; a definite advantage in the current economic climate."