There may not be much of the stuff that glitters in Scotland's mountains and rivers, but its forests, fields, sea lochs and bond warehouses are a different matter.

That is view taken in an intriguing new report "Asset Based Finance in Scotland" that suggests that owners in some of the industries most closely associated with Scotland are sitting on a goldmine. Realising and investing this latent wealth, the authors claim, could take the productivity and profitability of Scotland to a new level.

The analysis is contained in a newly published paper by the influential consultants 4-Consulting which claims that the natural assets of some of our key sectors means Scotland is especially well positioned to take advantage of the growing field of asset based finance, given that "capital assets in Scottish R&D are nearly 130 times the value of annual profits in the industry." and that "the value of inventories alone is nearly six times annual profits."

In these still-straitened financial times, the authors of the report liken asset based finance as the "well in the desert", capable of fuelling a new phase of growth for Scottish companies whose wealth is currently tied up in what they have, as opposed to the traditionally preferred measures of how much they are currently earning or likely to earn in the near future.

Asset based finance is the term used to describe lending against a company's assets. A vast range of physical and abstract entities are covered by that term, including "accounts receivable" (money owed), inventory, plant and machinery, property, intellectual property and brands.

In some definitions, the term includes "invoice financing", mainly meaning raising cash against unpaid invoices, a form of lending (famously used by large supermarkets like Tesco) that allows firms access to cash before their clients have actually paid up. Sometimes the providers of the cash will undertake to settle on behalf of the borrower. This is the most widely-used form, accounting for 78 per cent of the total amount loaned.

Of particular relevance to Scotland however is the less well-known "Asset based lending". This model encompasses a mix of funding against the entire range of business assets, ranging from invoices, stock, property, plant and machinery, but also against intangible assets such as brands.

Both types of lending have seen explosive growth in recent years, with values doubling since last year according to the sector's trade body the Asset Based Finance Association (ABFA), which is specifically focused on the latter category, excluding invoice finance normally provided through debt purchase.

In a report in June, ABFA announced that in 2014-15 around £880m of funds were secured against items such as machinery and real estate, up from £444m the previous year.

“Businesses tie up billions of pounds in assets like inventory and invoices – this form of finance puts those assets to use,” ABFA chief executive Jeff Longhurst said.

“They can turn these assets from being a drain on cash flow to a tool for growth.”

ABFA quantified the scale of the asset-based finance market at £18.9bn at the end of March 2015, a rise of six per cent from £17.7bn a year earlier.

This growth came at a time that traditional lending to businesses has fallen two per cent from £383bn March 2014 to £375bn this year, according to figures from the Bank of England.

In their report by 4-Consulting notes the gaps between the finance available depending on whether companies are looking for it on the basis of their profits or of the assets they own.

These can be hugely different things. An "extreme example" of this difference between output and capital stock cited by the paper is the Scotch Whisky industry, by definition unique to Scotland.

"Newly established distilleries may take several years before commercial income can be realised. Even when commercial income begins to flow, the value of a distilleries’ stock can be several times that of annual operating profits."

More generally the report measures the ratio of gross capital stock (the value of all assets) to Gross Value Added (GVA) in the agriculture, forestry and fishing industry at 10 to 1, meaning that a farm with capital of £101,000 generates £10,000 of value.

In another type of business, a law firm or an accountants for example, the ratio of gross capital stock to GVA is only 0.5, meaning that their capital stock (which might be no more than a room and a laptop) of only £5,000 could generate the same £10,000 of value in profits and wages.

The ratio of capital stock to value added for Scottish staples such as agriculture, forestry and fishing is nearly twenty two times that of service businesses such as law and accountancy, for the obvious reason that the former need vehicles, machinery, boats and buildings. Also they are in the business of growing or maturing tangible, saleable goods, from trees, to cereal crops, to oysters, to 12 year old malt whisky, that will inevitably increase the producers' capital stock value.

Scotland's knowledge-based companies in fields such as bioscience are world famous for their R&D, but it can be many years before any commercial value is realised from their labs. Says the report: "The best part of value in the industry may lie in partly developed innovations and patents slowly winding their way to markets. But R&D is also an industry where profits are often slim."

There lies the problem, and the opportunity. Traditionally banks lend to businesses based on their profits, or likely future profits, but asset based finance takes into account the value of a business’ inventories.

"There is potential competitive advantage for Scotland in this sector" says Ralph Leishman 4-Consulting's director and co-author of the report.

"So far it has mostly been larger companies that have used their muscle to leverage asset based financing, and there are more of them based in England. We think it's important to get it down to the next level in Scotland, as they have in the US, Scandinavia and Eastern Europe. The Scandinavian economies have similar economies to ours in terms of the relative size and importance of fishing, farming and primary food industries. I see a potential competitive advantage for Scotland here."

That claim is supported by the industry itself. The Royal Bank of Scotland is acknowledged by 4-Consulting's Leishman and others as the leader of the pack in terms of financial institutions operating in the sector:

"RBS has a division that looks at this, and they are very keen to look at innovative ways of providing finance. Perhaps because of the emphasis that bank has on getting money into the enterprise economy, they are prepared to be more innovative."

RBS ABL facilities total £7.6bn with around 12% of these in Scottish businesses. Leveraging off a national team of ABL experts as well as the strength of its bank presence, it has blue-chip Scottish clients such as the GAP Group, BenRiach Distillery and The Loch Lomond Distillery Company.

According to Kevin Haupert acting head of corporate UK and head of the underwriting portfolio at RBS's asset based lending team.

"The availability of working capital is an issue faced by most, if not all, businesses in Scotland and across the UK. Therefore, borrowing to increase liquidity is a significant part of today’s corporate environment."

"ABL is a cost-effective and flexible alternative for companies to increase working capital without having to slow business growth or raise equity. It’s ideal for manufacturers and distributors for example, who often have to invest in materials, inventory, new plants or technology, ahead of cash flow being generated by these assets.

"Total ABL balances continue to grow quickly since it is an attractive solution for businesses because it frees up additional cash headroom and provides a valuable capital cushion. It can give businesses the confidence to expand at any speed, because it is linked to assets and funding can be increased as the business grows. It also comes with lighter financial covenants than traditional forms of lending."

Matthew Davies of ABFA adds: "We would expect even more focus on the Scottish market in future and the ABFA will support that.

"Our members are supporting clients in the food and beverage industries, oil and gas sectors as well as the other general sectors such as manufacturing and recruitment where the industry is often found. New industry specific facilities such as construction finance are also coming online. And whilst we reference businesses like Loch Lomond distilleries (see box), it is also the support industries and supply chains as well – the SMEs that build the distilleries, the businesses that build the manufacturing equipment and so on."

4-Consulting's Ralph Leishman notes what a difference that asset based financing might have made in the early days of the Scottish fish farming sector, cites the example of the craft or micro brewing sector, a growing Scottish strength. He is currently working with a group of companies who are seeking to combine to raise finance for a badly-needed new bottling facility, a highly capital-intensive undertaking.

"Asset based finance could be an interesting route for them. None of them are bottling huge volumes so they could share the facility. This means that they could then be assessed not on their profitability or turnover, but banks would be lending on the basis of a ready-to-use bottling factory."

Matthew Davies of ABFA said: "There are a number of ABFA Members that have a specific focus and expertise in supporting Scottish companies - this is a flexible and innovative industry willing and able to provide more finance to many more Scottish businesses. Some are focused at the smaller end of the market and others at the larger more-corporate end – there is a great range. Scotland is a key market for the industry.

"We would encourage any business seeking finance to look beyond the ‘conventional’ options. There is a lot of information available about on the full range of funding options in the British Business Bank’s Business Finance Guide, from agencies such as Scottish Enterprise and from places such as the ABFA’s website."

For advocates of the industry, the only way is up, particularly for larger client businesses that may have a wider pool of assets that they can use to unlock funding. The private equity world is becoming more and more aware of how they can work with ABL providers – the products are very complementary – a fact that is also driving a lot of the growth at the mid large end of the market.

According to Davies: "The ABFA sees significant potential for both invoice finance and ABL, and our Members are very confident about the future. They both play an important role in supporting UK – and Scottish – businesses and could provide more funding to more businesses. Key to this is getting better information out to businesses seeking finance about the options that are available and may be appropriate for them, and also to the advisory and intermediary communities."

While history - not least of the housing market - provides warnings about the folly of assets as a virtual ATM, nevertheless, a sophisticated and well-regulated new market offers the chance to turn much of Scotland's gross capital stock from a hindrance to a positive engine for expansion. The chance seems too good to miss.

Asset based finance: who are the players in Scotland?

Aldermore Invoice Finance

Barclays Trade and Working Capital

Bibby Financial Services

Close Invoice Finance

Clydesdale Bank

HSBC Invoice Finance

GE Capital UK

Lloyds Bank Commercial Finance

RBS Invoice Finance

Santander

Shawbrook Business Credit

Ultimate Finance

Wells Fargo (formerly Burdale)

Working Capital Partners