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Asset-based lending (ABL) has seen a remarkable surge in popularity over the past decade. Once considered a niche financing solution, ABL is now a mainstream option for businesses seeking flexible capital solutions. The global asset-based lending market continues to expand as companies recognize its potential to unlock liquidity and support growth. But what’s driving this increased adoption? In this blog, we examine five main factors that are fueling the growth of asset-based lending. Plus, we explore how those forces relate to the AI-powered asset-based lending features in AXIS by AIO Logic!

1. Increased Demand for Alternative Financing Solutions

Traditional lending models have become more restrictive due to stringent regulations and risk-averse lending practices, making it difficult for small and mid-sized enterprises (SMEs) to secure credit. As a result, companies are turning to asset-based lending, which allows them to leverage assets such as accounts receivable, inventory, and equipment as collateral. This flexibility makes ABL a viable alternative for businesses needing working capital but struggling with conventional loans.

Due to the unique nature of asset-based lending compared to other types of loans, AXIS by AIO Logic has a module specifically dedicated to ABL. Within the ABL module, AXIS allows users to add various types of assets such as real estate, inventory, equipment, and accounts receivable. Users can also add custom, user-defined asset classes, as desired. This robust yet user-friendly functionality enhances lenders’ ability to offer flexible loan structures that many borrowers are seeking.

2. Economic Uncertainty and Market Volatility

Economic fluctuations, supply chain disruptions, and geopolitical tensions have made businesses seek financing solutions that can withstand uncertainty. Unlike traditional loans that rely on cash flow projections, asset-based lending is structured around tangible assets, allowing companies to access capital even in challenging financial conditions. This resilience makes ABL an attractive option for businesses navigating market volatility.

With asset-based loans being structured around tangible assets, it’s important that lenders can track asset value. To that end, AXIS automatically calculates collateral values in real-time and aggregates data to track historical collateral levels and trends. Additionally, AXIS provides lenders with automated advance rate functionality, through which users can specify advance rates for each asset segment, including automated seasonal and durational advance rates.

3. Advancements in Technology and Automation

Technology has significantly improved the efficiency of asset-based lending through AI, machine learning, and automation. These advancements allow lenders to assess asset values in real time, automate underwriting, and enhance risk management. By streamlining operations and reducing administrative burdens, technology is making ABL more accessible and attractive to both borrowers and lenders.

Whether it’s an asset-based loan, or any other type of loan, AXIS by AIO Logic delivers unprecedented automation, leading to increased efficiency and reduced costs. As an end-to-end platform, AXIS automates tasks at every stage of the loan lifecycle, including origination, underwriting, servicing, and more. This allows the entire loan process to run more smoothly, leading to an improved experience for both borrowers and lenders.

4. Expansion of Private Credit and Non-Bank Lenders

The rise of private credit markets and non-bank lenders has fueled the growth of asset-based lending, particularly as traditional banks face increased regulatory constraints. Private equity firms, hedge funds, and specialty finance companies have embraced ABL as a key financing tool, offering customized solutions that provide businesses with greater flexibility. This expansion has created more opportunities for companies to secure funding outside of conventional banking institutions.

While asset-based lending provides borrowers with more flexible and customizable financing options, the platforms that lenders have traditionally used to originate, service, and manage ABL loans are often not sophisticated enough to properly handle these loans. In fact, AXIS by AIO Logic is the only platform capable of handling the complex requirements of commercial lending and structured finance. With native handling for every commercial loan structure, AXIS provides lenders with the functionality needed to offer borrowers flexible and customizable financing options.

5. Growth of Industries with Asset-Intensive Business Models

Industries that rely heavily on physical assets, such as manufacturing, transportation, and retail, have driven demand for asset-based lending. These sectors require significant working capital to maintain inventory, purchase equipment, and manage supply chains. ABL enables businesses to leverage their existing assets for funding rather than taking on high-interest debt or diluting equity, making it a preferred financing solution in asset-heavy industries.

As borrowers in these industries rely on their physical assets, the ability of lenders to handle the complexity of these assets is crucial to successful loan management. To that end, AXIS provides lenders with automated handling of complex asset segmentation and asset segment limits. Specifically, AXIS allows users to add as many asset segments as desired (e.g., different segments of AR, Inventory, M&E, Real Estate, and user-defined asset classes). Then, users can specify a limit for each asset segment, ensuring defined rules are adhered to.

Conclusion

The growth of asset-based lending is driven by market dynamics, economic conditions, technological advancements, and the evolving financial landscape. As businesses continue to seek flexible financing options, ABL is poised to remain a crucial component of corporate financial strategies. With increasing adoption by private lenders and expanding use across industries, asset-based lending will likely continue its upward trajectory, providing businesses with reliable and adaptable financial solutions. If your firm is seeking to enter the ABL market or simply improve their ABL operations, please feel free to contact us today to schedule an intro call and learn more about all that AXIS has to offer!