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Asset-based Lending Market - By Type (Inventory Financing, Receivables Financing, Equipment Financing), By Interest Rate (Fixed Rate, Floating Rate), By End User (Large Enterprises, Small & Medium-sized Enterprises) & Forecast, 2024 - 2032

  • Report ID: GMI10085
  • Published Date: Jul 2024
  • Report Format: PDF

Asset-based Lending Market Size

Asset-based Lending Market was valued at USD 661.7 million in 2023 and is expected to grow at a CAGR of over 10% between 2024 & 2032.
 

Asset-based Lending Market

The market for asset-based lending (ABL) is growing due to economic expansion and recovery. Businesses occasionally witness more demand for their goods and services during economic recovery periods, which boosts income and necessitates the need for more working capital to support this expansion. Companies require funding to invest in inventory, equipment, and other assets as they look to take advantage of new opportunities. Conventional finance sources might not be as easily available or quick to secure, particularly for companies that have experienced financial setbacks during recessions. ABL presents a compelling substitute by enabling businesses to utilize their current assets—such as inventory, equipment, and receivables—to obtain the required capital. ABL is a vital tool for companies due to its adaptability and accessibility.
 

Another important factor propelling the ABL market's expansion is the diversification of funding sources. As the financial environment changes, businesses are increasingly seeking to investigate alternative financing options to lessen their reliance on traditional bank loans. To maintain operations and growth, this strategy assists firms in reducing risks, improving financial stability, and securing financing from a variety of sources. In this situation, ABL stands out as a strong choice as it provides a flexible & dependable funding source that is based on the asset worth of a business. Businesses can obtain capital even in situations where standard lending conditions are strict/when they need to temporarily close cash flow gaps by implementing ABL into their financial plan. In addition to offering financial stability, this diversity places businesses resilience but also positions companies to better navigate economic uncertainties.
 

For instance, in April 2024, working capital commitments in the ABL (Asset-Based Lending) market increased, as reported by the Secured Finance Network in its annual Asset-Based Lending Industry Survey, which surveyed bank and non-bank lenders. While SFNet reported that fewer new client deals were made in 2022 than in 2023, the deals that were made were greater in value.
 

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 increasing integration of technology is one of the main trends in the ABL business. The way that lenders evaluate, track, and handle collateral assets is being completely transformed by fintech advances. Asset valuations are becoming more accurate and efficient with the use of advanced analytics, Machine Learning (ML), and Artificial Intelligence (AI). By enabling real-time asset monitoring, these technologies lower the risks associated with shifting asset prices and give lenders access to the latest information. The potential of blockchain technology to provide transparent and unchangeable records of asset ownership and transaction histories is also being investigated. This might expedite the verification process and strengthen the relationship of trust between lenders and borrowers.
 

The increasing need for financial options with flexibility is another noteworthy trend. In the highly competitive and dynamic contemporary business landscape, companies require financing solutions that can change with their demands. ABL is in a good position to satisfy this need by providing specialized financing arrangements that are based on the assets owned by the borrower. Due to this flexibility, businesses can swiftly and effectively acquire cash by using their collateral to support a variety of financial needs, from ongoing operations to strategic expansion efforts. Furthermore, there has been a discernible shift in the use of ABL loans from emergency funding to purposes including expansion projects, acquisitions, and working capital optimization as firms become more aware of its advantages. The increasing inclination toward adaptable finance options is expansion and diversification of the ABL market.
 

The ABL market is also being shaped by the growing focus on sustainability and Environmental, Social, and Governance (ESG) factors. Lenders are incorporating sustainability assessments into their lending decisions and are paying closer attention to the ESG characteristics of their borrowers. The desire to reduce long-term risks connected with unsustainable business practices, as well as the increasing awareness of environmental and social responsibility and the regulations governing it, are the driving forces behind this trend. These days, asset-based lenders assess the sustainability of the collateral itself, considering things such as— how manufacturing processes affect the environment or how the asset use affects society. By pushing companies to implement more sustainable operations to be eligible for ABL, this trend toward ESG-aligned lending practices is fostering a more responsible and forward-thinking financial environment.
 

Asset-based Lending Market Analysis

Asset-Based Lending Market Size By Type, 2022-2032 (USD Billion)

Based on types of loan, the market is divided into inventory financing, receivables financing, equipment financing, and others. The receivable’s financing segment is expected to register a CAGR of 11% during the forecast period.
 

  • In the ABL industry, the financing segment for receivables has the largest CAGR for several reasons. Firstly, accounts receivable is a valuable and somewhat liquid asset for a lot of companies, which makes them a desirable security for lenders.
     
  • Businesses can immediately access working capital without having to wait for client payments by exploiting the significant amount of money they frequently have tied up in receivables. This promptness is very helpful for sustaining cash flow and assisting with ongoing business operations or expansion plans. Furthermore, receivable finance is an adaptable & scalable option that may expand in alignment with a business's sales, making it a perfect choice for companies that are expanding quickly.
     
  • Furthermore, companies are looking for more stable & predictable funding solutions in an unstable economic climate. Due to its strong correlation with actual sales and income streams, receivable financing offers a degree of certainty & stability that is highly regarded by lenders and borrowers alike, prompting its explosive rise in the ABL market.
     
Asset-Based Lending Market Share, By End-User, 2023

Based on end user, the market is divided into large enterprises & Small and Medium-sized Enterprises (SMEs). The Small and Medium-sized Enterprises (SMEs) segment dominated the global market with a revenue of over USD 900 million in 2023.
 

  • The ABL industry is dominated by the SMEs segment due to their financing needs and obstacles. Due to their often-smaller size and lack of significant collateral and lengthy credit records, SMEs frequently have trouble obtaining standard bank loans. With ABL, these companies may leverage their assets—such as inventory, equipment, and receivables—to obtain loans, giving them an easily accessible and adaptable financing option.
     
  • SMEs, who may have great assets but not enough cash to finance operations and expansion, will especially benefit from this. Moreover, SMEs require quick and flexible funding solutions as they are frequently more agile and go through faster growth phases.
     
  • The structure of ABL, which links borrowing capacity to asset value, fits quite nicely with SMEs' erratic and changing financial demands. The dominance of this market sector is further enhanced by the fact that SMEs find it simpler and faster to receive funds through ABL due to the fintech advances that expedite the asset appraisal and lending processes. Due to this, ABL has developed into a crucial financial tool for SMEs, helping them to successfully manage economic uncertainty, sustain cash flow, and take advantage of development prospects.
     
China Asset Based Lending Market Size, 2022-2032 (USD Billion)

Asia Pacific dominated the global asset-based lending market in 2023, accounting for a share of over 35%. The market for ABL, is dominated by the Asia Pacific area. 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 SMEs are rising at an unprecedented rate. Owing to the short credit histories and strict lending conditions, SMEs occasionally face difficulty in obtaining traditional bank financing. ABL offers an effective substitute in such cases by raising the required funds through the use of 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.
 

The demand for ABL is further fueled by the fact that many of the region's broad and diverse industrial base enterprises have sizable tangible assets that can be utilized as collateral. The Asia Pacific area is now a leading force in the worldwide ABL market due to the confluence of these elements, which include rapid economic expansion, benevolent regulatory regimes, technological advancements, and the need for flexible finance options.
 

The U.S. has a large market share in the ABL sector due to its highly innovative corporate environment, robust regulations, and developed financial system. As there are so many SMEs 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.
 

For instance, in March 2023, the banking sector faced what is currently regarded as the biggest banking crisis of the past ten years. It began with the failure of three U.S. banks. A year later, the banking sector is still recuperating, and banks are assessing new business strategies, placing a greater emphasis on customer connections, and exploring new avenues in the ABL arena.
 

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 SMEs—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 ABL 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 SMEs 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.
 

China's large manufacturing base, quick economic growth, and SMEs' profusion are the main reasons for its supremacy 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 ABL industry 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 ABL market.
 

Asset-based Lending Market Share

Wells Fargo and Bank of America held a significant share of over 10% in the ABL market. 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 ABL 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 March 2024, large amounts of tangible assets that can be used as collateral were held by many of the diverse and broad industrial base's firms in the Asia Pacific region, which in turn drove the demand for ABL. Due to the combination of these factors—which include the demand for flexible financing choices, technology improvements, supportive regulatory frameworks, and rapid economic expansion—the Asia Pacific region is currently a dominant force in the global ABL industry.
     
  • In October 2023, the international fintech software partner for secured credit, Solifi, announced the latest product improvements for ABLs. Several new features were introduced in the update with the goal of enhancing customer experience, automation, and reporting to increase efficiency. The company's SaaS Open Finance Platform makes it possible to roll out new services that enhance borrower and lender communication quickly. These new features provide innovations to the company's ABL and receivables finance, benefiting lenders and clients without disrupting their business operations, thereby reducing the reliance on human reporting.
     

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 (SMEs)

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

 

Authors: Suraj Gujar , Deeksha Vishwakarma

Frequently Asked Questions (FAQ) :

Industry size for asset based lending was worth USD 661.7 million in 2023 and is projected to expand at over 10% CAGR from 2024 to 2032, due to economic expansion and recovery.

The receivable’s financing type of loan segment in the asset based lending industry is projected to record 11% CAGR between 2024 and 2032, as these loans are valuable and somewhat liquid asset for a lot of companies, which makes them a desirable security for lenders.

The small and medium-sized enterprises (SMEs) end-user segment in the asset based lending industry amassed over USD 900 million in 2023 owing to their often-smaller size and lack of significant collateral and lengthy credit records.

Asia Pacific industry recorded over 35% share in 2023 and is estimated to grow at notable rate between 2024 and 2032, on account of the rapid economic growth, dynamic business environment, and development of financial infrastructure in the region.

Asset-based Lending Market Scope

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Premium Report Details

  • Base Year: 2023
  • Companies covered: 24
  • Tables & Figures: 218
  • Countries covered: 22
  • Pages: 210
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