SFNet Survey Data Reveals a Resilient, but Evolving Lending Landscape

The asset-based lending (ABL) market ended 2025 with a familiar paradox: strong activity paired with rising uncertainty. On one hand, the Secured Finance Network’s Q4 and Full-Year 2025 ABL Survey shows a market that remains fundamentally healthy, characterized by stable credit performance, steady utilization, and continued lender confidence. On the other, a combination of slowing economic growth, policy volatility, and structural changes in deal flow suggests that the industry is entering a more complex phase.

Taken together, the data tells a clear story: ABL is not weakening, but it is changing.

Economic Backdrop: Resilient Growth Meets a Clear Deceleration

The macroeconomic environment heading into year-end set the tone for the ABL market. According to the KeyBridge economic context included in the SFNet report, U.S. growth remained resilient through much of 2025, supported by strong consumer spending and a surge in AI-related capital investment. But by Q4, the picture had shifted meaningfully.

GDP growth slowed sharply to approximately 0.7% in Q4, down from 4.4% in Q3, with much of the deceleration attributed to weaker consumer activity and the temporary effects of a government shutdown . Even after adjusting for those distortions, underlying growth slowed to roughly 1.9%, the weakest pace since 2022.

At the same time:

• Consumer spending softened materially
• Business investment outside of AI infrastructure weakened
• Labor markets entered a “low-hire, low-fire” phase
• Inflation remained above the Federal Reserve’s target

Trade policy uncertainty added another layer of complexity. Ongoing tariff developments and legal challenges have created a fluid policy environment, making it more difficult for businesses to plan and invest. The result is a late-cycle environment—one in which growth persists, but momentum is clearly fading.

SFNet Q4 2025 Survey: Stability in Core Metrics

Despite macro uncertainty, the SFNet survey data underscores a remarkably stable industry.

Among reporting bank lenders:

• Total commitments reached $369.5 billion, with modest +0.5% quarter-over-quarter growth
• Outstandings declined slightly (-5.1% Q/Q), reflecting seasonal paydowns
• Utilization remained near long-term averages at approximately 39.4%

Non-bank lenders showed stronger momentum:

• Commitments rose +5.5% Q/Q
• Outstandings increased +12.6% Q/Q
• Utilization climbed above historical averages

This divergence highlights a key theme: non-banks are gaining share, particularly in more flexible and opportunistic lending segments.

Seasonality and Scale: Understanding Q4 Dynamics

At first glance, the decline in bank outstandings may appear concerning, but industry participants were quick to contextualize the movement. ABL maintains some seasonality—particularly in retail-driven portfolios. Utilization typically peaks in October and November before declining as borrowers pay down revolvers following the holiday season.

That pattern held in Q4 2025, but beneath the seasonality, another dynamic is emerging: deal concentration and scale.

Survey discussions repeatedly pointed to a shift toward:

• Larger average deal sizes
• Fewer overall transactions
• Greater overlap among lenders targeting the same borrowers

In Q4 alone, average new deal sizes for banks approached $72.6 million, reinforcing the move upmarket. This suggests that while overall activity remains strong, it is increasingly concentrated among larger borrowers and transactions.

Credit Quality: Strong, but with “Lumpy” Signals

Credit performance remains one of the most encouraging aspects of the ABL market.

Key metrics show:

• Criticized and classified loans declined significantly, down more than 300 basis points quarter-over-quarter
• Write-offs remain low, with only modest increases
• Loss rates continue to track below long-term averages

However, the data is not without nuance. Non-accruals increased modestly in Q4 for banks, and survey participants pointed to several large, idiosyncratic credits—including high-profile restructurings—as drivers of volatility. Credit issues appear to be moving through the system, rather than accumulating broadly.

This pattern suggests that while individual credits may create noise, systemic credit deterioration remains limited.

Demand and Sentiment: Cautious Optimism

Lender sentiment remains broadly positive, though slightly tempered.

• Bank confidence rose to a combined score of 62, indicating modest expansion expectations
• Non-bank sentiment declined slightly but remained stable overall

Demand for new business continues to be strong:

• Bank demand index: 74
• Non-bank demand index: 73

Importantly, no lenders expect demand to weaken in the near term, underscoring continued confidence in ABL as a financing solution. That said, the composition of demand is shifting.

Participants noted that while activity remains elevated, sentiment has moderated—from extremely bullish conditions earlier in the year to a more measured outlook.

Market Structure: Upmarket Migration and Middle-Market Divergence

One of the most important structural developments in the ABL market is the continued shift upmarket.

Lenders across both bank and non-bank segments are increasingly:

• Targeting larger borrowers
• Competing for more complex transactions
• Concentrating activity among a narrower set of deals

At the same time, the lower middle market appears more challenged.

Survey discussions highlighted:

• Reduced turnaround deal flow
• Limited traditional C&I restructuring opportunities
• Increased reliance on liquidation-driven outcomes

This divergence is reshaping the competitive landscape. While larger borrowers benefit from strong access to capital, smaller companies face a more fragmented financing environment, with alternative products and niche lenders playing a greater role.

Borrowing Base Fundamentals Remain Consistent

Despite these structural changes, the core mechanics of ABL remain unchanged.

Borrowing bases continue to be dominated by:

• Receivables (approximately 42%–60%)
• Inventory (approximately 28%–48%)

These asset classes remain central to ABL structures, providing reliable collateral coverage even as economic conditions shift. This consistency reinforces one of ABL’s key advantages: durability across economic cycles.

Profitability and Business Model Divergence

The survey data also highlights meaningful differences between bank and non-bank lenders.

• Banks generate approximately 3.0% revenue as a percentage of outstandings
• Non-banks generate significantly higher yields at 10.7%

However, these higher returns for non-banks are accompanied by:

• Higher borrowingcosts
• Greater exposure to complex credits
• Increased reliance on fee income

This divergence underscores the complementary roles both segments play within the secured finance ecosystem.

Looking Ahead: 2026 and Beyond

As the industry moves into 2026, several themes are likely to shape the ABL market.

1. Slower, but Positive, Economic Growth

The economy is expected to continue expanding, albeit at a more moderate pace. This should support ongoing demand for working capital financing.

2. Increased Selectivity

Lenders are becoming more disciplined, placing greater emphasis on credit quality, structure, and collateral monitoring.

3. Continued Upmarket Focus

Competition for large, high-quality borrowers will remain intense, while lower middle-market segments face ongoing pressure.

4. Expanding Role for Non-Banks

Non-bank lenders are likely to continue gaining share, particularly in flexible and opportunistic transactions.

5. Persistent Policy and Macro Uncertainty

Tariffs, inflation, and geopolitical risks will continue to influence borrower behavior and lending strategies.

Resilience Through Adaptation

The story of ABL in 2025 is not one of rapid expansion or contraction; it is one of resilience and adaptation.

The market has demonstrated its ability to:

• Navigate a slowing macroeconomic environment
• Maintain strong credit performance
• Adjust to evolving borrower needs

As the credit cycle progresses, these strengths will become increasingly important. Deal sizes are growing, competition is intensifying, and lenders are becoming more selective. In a more uncertain world, those characteristics may define the next era of secured finance. And for asset-based lending, that evolution is not a sign of weakness, it is a sign of maturity.