Small Changes in Credit-Insurance Market
Friday, March 13, 2009 12:43
Asset-based lending is the life blood of the small and medium enterprise sector. According to reports by Richard Northedge, the closure of the credit-insurance market is impacting hard on small businesses that rely on using their assets as collateral for borrowing.
Anything from the computer to the office furniture, never mind vehicles or plant, can be offered as security to lenders, but now that insurers are reducing their limits, the value of assets companies can offer has fallen sharply.
Invoice discounting and factoring are the most common base of asset-based lending but slow payments and the risk of default is causing credit insurers to re-assess their risk and lower limits. The withdrawal of foreign banks has exacerbated the asset-based finance market.
Insolvency companies are seeing many fundamentally sound businesses squeezed so tightly their future is threatened.
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