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The current marketplace for the provision of invoice discounting / asset-based lending in the world of M & A / buyouts

By David Thomson, CEO, Close Invoice Finance

Demand for alternative ways to finance M & A activity is relatively high, which has lead to an increase in the forms of funding available.

Invoice discounting / asset-based lending differs from other types of corporate finance because the funds are effectively raised from within the company itself, therefore control of the firm and its future development continues to reside in the hands of the management team, rather than an external financier.

Invoice discounting and factoring companies have developed some of the skills necessary to support this type of lending, in particular auditing of the sales ledger or receivables. However, there is still a great variance in the depth and frequency of the audit itself, with some of the smaller players leaving the review to the sales team because it's quicker and easier.
Close Invoice Finance will work in tandem with traditional forms of M&A finance that have fallen short of funding requirements through book debt top ups.

Demand for asset-based lending is set to continue, especially as the economy improves. Businesses that are poised to take advantage of these growth opportunities will be looking towards a form of finance that will deliver greater availability of cash to help them exploit this. Asset-based lending delivers this due to its flexibility. Furthermore, asset-based lenders, unlike some other traditional lending sources, take a longer-term view on the business and provide ongoing support.

In general, increased amounts of available financing in the absence of a robust M&A market has created greater competition among lenders. Over the last year, pricing has come down in the asset-based, cash flow and junior secured debt markets due to the supply/demand imbalance.

But, while no one is ready to declare a new bull market in M&A this year, the trends are favourable. The availability of financing has increased, valuations have improved and the availability of private equity is growing too.


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