Asset-based Lending Market Size

Asset-based Lending Market size was valued at USD 661.7 billion in 2023 and is expected to grow at a CAGR of over 11% between 2024 and 2032. The surge in demand for working capital is another key driver in the market. As businesses expand and navigate through post-pandemic recovery, the need for adequate working capital becomes crucial to sustain operations and fund growth initiatives. Recent developments in the business world underline this trend.

For instance, A report by J.P. Morgan in August 2023, indicates that approximately USD 633 billion is currently trapped in working capital among S&P 1500 companies. This situation arises as businesses face challenges in optimizing their cash flow and managing inventory effectively. This situation underscores the need for more flexible financing solutions to alleviate liquidity constraints. As businesses seek to improve their cash flow management and address inventory challenges, asset-based lending has become a crucial tool to unlock trapped capital and support ongoing operational and growth needs, thus driving the demand for such financial solutions.

Rising interest rates have a notable impact on the asset-based lending (ABL) market. As central banks implement rate hikes to combat inflation and stabilize economies, borrowing costs increase for businesses. This can make traditional forms of financing more expensive, prompting companies to seek alternative financing solutions. For instance, The Federal Reserve has kept the federal funds rate steady at a 23-year high of 5.25% to 5.50% for the eighth consecutive meeting as of July 2024.

In response, businesses are increasingly turning to asset-based lending as a more cost-effective alternative to traditional loans. ABL offers a way to secure financing based on assets rather than the higher costs associated with conventional loans, thereby making it a more attractive option in a high-interest-rate environment.

Concerns over asset valuation pose serious risks to the asset-based lending market. The precise & trustworthy evaluation of collateral assets, including machinery, real estate, inventory, and accounts receivable, forms the basis of ABL. However, there may be many difficulties in this valuation procedure. Market conditions, shifts in demand, technology obsolescence, and other economic factors can cause asset values to fluctuate, making the true value of the collateral unclear.

Lenders may provide either too much or too little credit due to outdated or inaccurate appraisals, potentially jeopardizing borrowers' financial stability. If the borrower defaults, overvaluation could result in inadequate collateral coverage, which could cost the lender money. On the other hand, undervaluation may limit the borrower's ability to obtain capital, which would negatively impact corporate operations.

Asset-based Lending Market Trends

The globalization of business operations is driving an expansion in cross-border asset-based lending. Companies operating in multiple countries are seeking financing solutions that can accommodate their international asset portfolios. Lenders are responding by offering more sophisticated cross-border ABL solutions that cater to the complexities of global asset management and regulatory compliance.

For instance, in January 2024, FundPark, a Hong Kong-based FinTech company, has successfully secured a significant asset-backed securitization facility USD 500 million from Goldman Sachs. The newly secured USD 500 million facility is expected to enhance FundPark's capacity to support a broader range of entrepreneurs, particularly in Asia, where the cross-border eCommerce market is rapidly expanding.

SME are becoming a larger segment of the asset-based lending market. These businesses are increasingly turning to asset-based lending to secure working capital, manage cash flow, and fund expansion projects. The flexibility and accessibility of ABL make it an attractive option for SME that may not have access to traditional bank financing or prefer the agility that ABL offers.

For instance, according to data from UK Finance in March 2024, In the fourth quarter of 2023, approximately USD 4.5 billion was lent to small and medium-sized enterprises (SME) in the UK, marking the first quarter without a decline in lending since the second quarter of 2022. This rebound is indicative of the growing reliance of SME on asset-based lending to secure working capital and support their operational needs. The improvement in lending figures underscores the increasing role of ABL as a crucial financing tool for SME, which often face challenges accessing traditional credit.

Asset-based Lending Market Analysis

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Based on types, the market is divided into inventory financing, receivables financing, equipment financing, and others. The inventory financing segment is expected to register a CAGR of over 12% during the forecast period.

• The inventory financing segment of asset-based lending market is growing at significant rate due to businesses increasingly recognize the value of their inventory as collateral for securing loans, which provides a flexible and cost-effective solution to manage their working capital. This method helps companies unlock liquidity tied up in inventory, enabling them to respond more agilely to market demands and operational needs.
  
• Additionally, the rise in e-commerce and global trade has significantly increased inventory turnover rates, driving demand for inventory-based loans. Companies operating in these sectors require efficient financing solutions to support their growing inventory levels and supply chain needs. As a result, inventory financing offers a viable option for businesses to enhance their cash flow and operational efficiency, fueling its growth in the market.

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Based on end user, the asset-based lending market is divided into large enterprises & small and medium-sized enterprises (SME). The large enterprises segment dominated the global market with a revenue of over USD 370 billion in 2023.

• The large enterprises segment dominates the market due to their extensive capital needs and greater access to financial resources. These enterprises typically manage significant inventories, receivables, and equipment, making them prime candidates for ABL solutions. Their established financial infrastructure and higher borrowing capacities allow them to leverage asset-based loans more effectively, ensuring they can support large-scale operations, expansion, and strategic investments.
  
• Additionally, large enterprises often benefit from economies of scale, which provide them with better terms and lower interest rates on ABL facilities. Their established credit profiles and lower risk profiles make them attractive to lenders, leading to a higher proportion of asset-based lending directed towards them. This dominance is further reinforced by their sophisticated financial management practices and the need for substantial, flexible financing solutions to sustain their expansive business operations.

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Asia Pacific dominated the global asset-based lending market in 2023, accounting for a share of over 35%. The Asia Pacific area dominates the market for ABL. This is due to the region's rapid economic growth, dynamic business environment, and developing financial infrastructure. Some of the fastest-growing economies in the world are found in this region, notably those of China and India, where SME are rising at an unprecedented rate. Owing to the short credit histories and strict lending conditions, SME occasionally face difficulty in obtaining traditional bank financing. ABL offers an effective substitute in such cases by raising the required funds by company assets such as inventories and receivables.

Significant developments in fintech and digital financial services have also been made in the Asia Pacific region. These developments have reduced the asset appraisal and monitoring process, increasing the effectiveness and accessibility of ABL. The governments in the area are also becoming more pro-financial and innovative, putting laws and policies into place that promote ABL and other alternative financing options. This governmental backing and the increasing recognition of ABL by different businesses have helped to make it widely used.

China's large manufacturing base, quick economic growth, and SME' profusion are the main reasons for its dominance in the ABL market. Traditional bank loans are difficult for Chinese firms to obtain owing to the strict high collateral requirements. By enabling companies to use their inventories, receivables, and other assets as leverage to secure funding, ABL offers a compelling substitute.

The expansion of the asset-based lending market has been further assisted by the Chinese government's encouragement for financial innovation and the establishment of a strong fintech ecosystem. Furthermore, China's massive industrial and commercial operations create a strong need for flexible financing options, securing its top spot in the world's market.

The U.S. has a significant market share in the ABL sector due to its highly innovative corporate environment, robust regulations, and developed financial system. As there are so many SME in the U.S., there is a strong demand for flexible financing solutions including ABL. These companies frequently need quick access to funding to control cash flow, take advantage of expansion possibilities, and ride out economic fluctuations.

ABL is more appealing due to the strong legal & financial framework in the U.S., which ensures accurate asset assessment and the preservation of lender rights. Furthermore, the availability of cutting-edge fintech solutions and a competitive loan market make ABL a sensible & effective financing choice for companies in a range of industries.

Japan's established industrial base and the necessity for enterprises to find other financing options in the face of a difficult economic climate support the country's ABL market. Since traditional banks frequently have strict lending criteria, Japanese businesses—especially SME—look to asset-based financing as a feasible option. The nation's emphasis on efficiency and technological innovations has led to the development of sophisticated asset management and valuation systems, which have aided in the expansion of the asset-based lending market.

Furthermore, companies in Japan are optimizing their financial strategy due to the country's aging population and slow economic growth, which is increasing the demand for flexible & dependable financing choices such as ABL.

South Korea's dynamic and export-oriented economy, which includes many SME and major conglomerates, necessitates effective finance solutions to manage their extensive supply chains, driving the country's ABL sector. The nation's cutting-edge technology infrastructure facilitates the uptake of fintech technologies, simplifying and improving accessibility to the ABL process.

The legislative landscape in South Korea has changed to accommodate alternative financing methods as well, realizing the value of easy access to cash for stable and expanding businesses. Due to this, companies in South Korea are depending more on ABL to handle their cash flow, provide working capital, and assist with expansion plans.

Asset-based Lending Market Share

Wells Fargo and Bank of America held a significant share of over 10% in the ABL industry. Wells Fargo's wide network and market reach allow them to command a substantial part of the ABL industry. Wells Fargo has access to a broad range of businesses across different industries and geographic locations as it has one of the largest branch networks in the country. The bank is a desirable choice for companies looking for asset-based loans due to its broad reach and solid financial standing, which enable it to provide competitive rates and terms.

To further address the requirements of businesses, Wells Fargo has a specialized team that specializes in ABL and offers customized solutions and knowledgeable guidance. Considering the bank's investments in cutting-edge technology and reliable digital services, its ABL offers are more effective and accessible, enabling customers to manage their loans.

The substantial market position that Bank of America holds in the ABL sector may be ascribed to its wide range of financial offerings, extensive worldwide reach, and reputable brand. Bank of America draws customers that desire integrated solutions that handle various financial demands by providing a wide range of financial products including ABL. The bank has a competitive advantage in the asset-based lending market owing to its cross-border operations and worldwide activities, which enable it to service multinational firms and businesses with global operations.

Bank of America's concentration on middle-market businesses and major corporations guarantees that they serve important markets that require significant ABL capacity. Additionally, companies looking for a reliable loan partner are drawn to the bank by its strong brand and solid reputation for stability and dependability. Constant investments in digital innovation and technology advances improve the customer experience.

Asset-based Lending Market Companies

Major players operating in the ABL industry are:

• Wells Fargo
• Bank of America
• JP Morgan Chase & Co.
• Citizens Bank
• PNC Bank
• KeyBank
• Capital One Bank
  

Asset-based Lending Industry News

• In June 2024, Wells Fargo has taken the lead in a syndicate that closed a significant asset-based lending (ABL) credit facility amounting to USD 1.1 billion for White Oak Commercial Finance (WOCF). This facility was finalized with the participation of 11 other unnamed banks, marking a notable boost in WOCF's lending capabilities.
  
• In November 2023, Neiman Marcus Group has announced a significant amendment and extension to its asset-based lending (ABL) credit facility. The company entered into a Fourth Amendment to its existing Credit Agreement, which governs a USD 900 million ABL facility led by Bank of America, N.A. as both Administrative and Collateral Agent.
  

The asset-based lending market research report includes in-depth coverage of the industry with estimates & forecasts in terms of revenue (USD Billion) from 2021 to 2032, for the following segments:

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Market, By Type

• Inventory financing
• Receivables financing
• Equipment financing
• Others

Market, By Interest Rate

• Fixed rate
• Floating rate

Market, By End User

• Large enterprises
• Small and Medium-sized Enterprises (SME)

The above information is provided for the following regions and countries:

• North America
  • U.S.
  • Canada
• Europe
  • Germany
  • UK
  • France
  • Italy
  • Spain
  • Rest of Europe
• Asia Pacific
  • China
  • India
  • Japan
  • South Korea
  • ANZ
  • Rest of Asia Pacific
• Latin America
  • Brazil
  • Mexico
  • Rest of Latin America
• MEA
  • UAE
  • Saudi Arabia
  • South Africa
  • Rest of MEA