2025 Highs

It has been a successful year for the ABL market, demonstrated by strong activity levels and an increased interest in asset based lending products. As a team we have seen some particularly positive stories and trends across the year, including:

  • Ongoing focus by the clearing banks in offering asset based lending, invoice financing, trade and other working capital solutions to corporates:

The clearers have performed well in the ABL and invoice finance mid-market space in 2025. Benefitting from the ability to offer competitive pricing together with the option to provide ABL alongside other banking products, the banks have been very attractive to corporates. Non-recourse, off balance sheet structures have been a particularly popular product, along with hybrid asset based lending and cashflow offerings. Trade facilities from the banks have also been on the increase. We are expecting to see new, creative solutions in 2026, as the banks develop their product types and documentation suites.

  • Private credit targeting ABL:

There has been a continued focus by private credit on the ABL market in 2025. A number of new fund-backed asset based lenders have launched this year, recruiting well-known figures in the ABL market with demonstrable track records to lead on delivering new business. Our expectation is that these funds will become front and centre in the challenge to win new ABL business in 2026.

  • Greater flexibility for corporates using ABL:

In a competitive market for the ABL funders, corporates have benefitted in 2025. Lower pricing, larger single hold levels and extras such as accordions have all made the borrower experience a very favourable one this year. Deal sizes have also been increasing, due to the flexibility around products on offer. Whether these conditions will be as favourable in 2026 remains to be seen, if the focus on book building by funders instead turns to a review of income and pricing, but for now borrowers have been driving excellent deals.

  • Strong sector activity, in particular retail and manufacturing:

Asset heavy sectors such as retail and manufacturing have featured frequently in the transactions we have seen in 2025. Funders across the market have been more willing to look at retail after previous years of some hesitancy, with many new-to-funder deals completing this year in the retail space. Manufacturing has been very strong, with many of our biggest deals this year in the industrials and advanced manufacturing space. The economic and political volatility of the last twelve months has made headroom and availability a priority for corporates, who have been looking at ways to bolster their working capital solutions. We expect 2026 to follow a similar pattern, with little signs of stability to come in the political and economic climate.

2025 Challenges

From a transaction management perspective, some key themes have emerged in 2025:

  • The demise of the landlord waiver:

Waivers from third party landlords of premises holding a borrower’s inventory are becoming increasingly challenging to obtain. We have seen an emerging pattern of hesitancy and reluctance from landlords to agree to such waivers, in many cases refusing to sign the documentation. As a result of such pushback, 2025 has seen a marked increase in funders applying rent reserves to mitigate the lack of a landlord waiver, leaving borrowers needing to think about the impact on their availability under ABL facilities. This is a challenge we expect to remain as we head into 2026, so early engagement by debt advisors and corporates with landlords to smooth the way is likely to be increasingly beneficial.

  • More unrepresented outgoing funders:

2025 has seen an increase in the number of outgoing funders choosing to deal with redemption and security release mechanics in-house. Whilst not an issue for funders to act unrepresented in these circumstances, there is sometimes still a degree of unfamiliarity for some operational teams. We have encountered multiple deals this year where there have been difficulties and delays involving the Land Registry DS1 forms for releasing legal mortgages over property. The Land Registry has strict identity verification requirements for unrepresented parties, which are often missed or forgotten until the days before a completion. From a transaction execution perspective, release and redemption mechanics involving the outgoing funder will need to be front and centre going forward, if the trend of outgoing funders acting without legal representation continues in 2026. Early engagement around redemption processes where there is a known property aspect will continue to be key; reaching out to law firms such as AG for training and support will also help funders to streamline their processes.

  • Prolonged duration of deals:

2025 has been the year of the loitering transaction. Whilst some transactions have moved quickly, many financings have taken much longer to complete. This has been caused by various factors including cyber risk analysis and volatility in the market due to economic and political instability, creating somewhat of a ‘watch and wait’ culture particularly from a financial reporting perspective. We have seen deal terms refreshed post updated financials, along with delays increasing legal spend. We expect this will be a similar story as we head into 2026 and so realistic transaction timetables should be properly considered by stakeholders at the outset, to help drive efficient processes and manage transaction costs.