The rise of asset-based lending has been a major trend in private credit
Both asset-based lending and asset-based finance have become extremely popular areas of financing within the private credit asset class.
To an extent ABL and ABF are interchangeable, although the former tends to refer to specific company assets that act as the underlying collateral for a loan – such as inventory or receivables – whereas the latter embraces a wider range of collateral (often not related to company assets) such as infrastructure, real estate, cars and mortgages.
ABL and ABF bear some similarity to the likes of asset-backed securities (financial bonds secured by a pool of income-generating assets) and factoring, a financial transaction where a business sells its accounts receivable to a third-party factoring firm at a discount to improve short-term cashflow.
Filling the gap left by the banks
The rise of ABL and ABF in private credit has occurred largely due to the banks deciding that they no longer have the risk appetite for these types of loans – and duly offloading many of them to the private sector. The rationale is similar to that which drove the rapid growth of direct lending – and many observers predict that private ABL and ABF will become even bigger than the direct lending market.
Funds covering this part of the market are accounting for a larger proportion of capital raising within the private credit asset class. In our LP Perspectives 2026 study, 35 percent of investors said they planned to invest more in ABF over the following 12 months – making it the second-most-popular allocation choice after direct lending.
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