Over the next five years, financial institutions have a unique opportunity to capitalise on the rising demand for receivables finance. Let’s first look at the evidence for this trend before exploring how institutions can maximise the opportunity.

The global economy

According to the International Monetary Fund, global growth will be “stable but underwhelming” in 2025 – and hit a “mediocre” 3.1 percent over the next five years. Regionally, the IMF anticipates growth downgrades for the Middle East, Central Asia and sub-Saharan Africa, driven by oil conflicts, civil unrest and extreme weather events. The US is expected to fare better but European markets are also likely to see revised forecasts on the downside. On the other hand, China and India, thanks to surging demand for semiconductors and electronics, are predicted to perform well.

So, what does this picture of global GDP imbalance and geopolitical instability mean for business funding going into the New Year? Possibly very little, if recent rather optimistic forecasts, are anything to go by.

Ongoing global instability won’t dampening appetite for growth

Findings by EY ITEM Club suggest that bank-to-business lending in the UK is on course to grow by 3.1 percent in 2024, and then 5.6 percent in 2025 and 6.2 percent in 2026. The important point is that companies’ appetite for borrowing is set to increase as capital costs decrease.

Private equity firms’ confidence in deal making in the year ahead is surging, according to a survey by Deutsche Numis, which found that 84 percent of respondents expected to complete five to 10 deals next year. That’s significantly up from 2023, when just 12 percent of private equity firms surveyed said they were “highly likely” to execute bolt-on acquisitions to portfolio companies.

Experts tentatively predicted this renewed confidence at the beginning of the year. Quoted in a Euromoney article, HSBC’s head of global trade and receivables finance Vivek Ramachandran said falling cost of credit, linked to falling reference rates, would “hopefully provide a little bit of impetus for companies to embark on new economic activity or expansion.” And rates have fallen, albeit gradually, in the UK, the US, the eurozone and China. Indeed, there have been recent rate cuts by central banks responsible for seven of the top 10 most traded currencies.

Do financial institutions have the tools to meet the rise in lending demand?

Unforeseen events aside, it would appear that 2025 is going to see a marked uptick in demand for trade and receivables finance, as part of a wider business investment trend. The question financial institutions need to ask themselves is, do we have the operational capacity and tools to meet the growing need for short-term borrowing?

It’s certainly the case that many small to medium-sized commercial banks and asset managers find it challenging to offer trade and receivables finance to corporate clients. This is because these financial institutions are without the necessary operational infrastructure. We wrote about this in more detail back in July 2024 – see our blog here. As for larger lenders, while they undoubtedly have the capacity to meet renewed growth in business funding, they might still face difficulties caused by legacy platforms that slow decision making and require time-consuming manual inputs.

Thankfully, Aronova can support all sizes of banks and asset managers with their short-term business lending strategies, providing they require a revolving working capital facility of at least $10m. Our cloud-based platform allows banks and asset managers to outsource the day-to-day management of receivables purchase programmes, with functionality covering seller data collection, invoice eligibility, invoice sale and the calculation of seller cash settlements. We’re also tackling white-collar fraud through advanced monitoring tools and are enabling portfolio-wide automation of global debtor credit limits.

By transferring the above operations to Aronova, businesses can spend more time building their working capital portfolios. And with many experts predicting a renaissance in corporate investment and borrowing in 2025, financial institutions must have the ability to seize the opportunity for growth.  

Ready to learn more?

Contact us to find out more, and talk to a member of the Aronova team.


Sources:
IMF – Global growth is expected to remain stable but underwhelming
Bank lending to business set to grow by 2.6%
BCC economic forecast
Private equity firms’ confidence in dealmaking surges, survey shows
Trade finance survey: Outlook hangs on rate cuts by year end

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