As 50 Cent once said, "Go shorty, it's your birthday..." - and in the world of asset-based lending (ABL), it’s officially the season to “get in the club.” But in this case, the club isn’t a party - it’s a smart strategy where lenders team up to win bigger, better deals.  Club partnerships are going to become critical as the market for large $50 to $100+ mm non-bank ABL facilities grows. The intense competitive landscape is also going to dictate “club” lending as deal sizes continue to increase. In this evolving landscape, lenders are increasingly joining forces to win larger, more complex transactions - signaling a shift toward cooperation in a traditionally competitive space. Why now?

Several factors are driving this trend. First, large-ticket ABL deal sizes are migrating to bigger holds. As private equity firms continue to pursue aggressive roll-up strategies and large-scale acquisitions, the financing needs of borrowers are often too large or complex for a single ABL lender to handle comfortably on its own. Multi-lender structures allow for a spreading of risk while maintaining the speed and flexibility that ABL borrowers expect.

Second, liquidity is abundant, but pricing is tight. Many ABL lenders are sitting on significant dry powder, eager to deploy capital. However, with tightening spreads and fierce competition for high-quality deals, lenders are recognizing that teaming up may be the best way to remain active and relevant in the deal flow.

Third, borrowers themselves - particularly sponsor-backed companies - are becoming more sophisticated. They’re increasingly looking for tailored capital structures and broader relationships that can support their long-term growth strategies. A well-structured club deal can offer both scale and the assurance of multiple institutional relationships.

To summarize, while deals are getting larger, the quantity of non-bank ABL deals has not grown at the pace of new capital entering the space.  So, for non-bank ABL shops to aggressively deploy capital they will have to “share” deals.  The pressure to deploy capital has never been greater as non-bank ABL has become a strategy for many large asset management platforms, which are usually less patient as they emphasize capital deployment.

What is a club deal and how is it different from a syndicated loan?

In contrast to a traditional syndicated loan where one lead lender arranges a facility and then syndicates out pieces to others, a club deal involves two or more lenders partnering early in the process - often equally or near-equally - to provide a loan. These lenders work together to negotiate terms, underwrite risk, and support the borrower throughout the loan's life.  This model fosters transparency, shared risk, and a collaborative spirit that can be more attractive to borrowers. For lenders, it offers an opportunity to build deeper relationships - not only with the borrower, but with fellow financial institutions.

The strategic advantage of teaming up

In today’s hyper-competitive market, ABL lenders can no longer rely solely on speed or price. Relationships and reliability matter more than ever, especially in deals that require creativity or aggressive timelines.  By partnering with complementary lenders, firms can punch above their weight class. Smaller regional lenders can gain access to larger deals they would otherwise have to pass on, while larger institutions can benefit from local market knowledge or specialized underwriting capabilities.  Moreover, collaboration helps spread operational and regulatory risk, especially in cross-border or multi-jurisdictional deals. With regulatory pressures mounting, a shared approach to compliance, collateral monitoring, and reporting can significantly reduce the burden on any one institution.

A Cultural shift in lending

Perhaps the most notable aspect of this trend is cultural. Asset-based lending has historically been a competitive, even cutthroat, segment of the credit market. But as the ecosystem matures, lenders are realizing that long-term sustainability may depend on co-opetition - a hybrid of cooperation and competition.  The firms that figure out how to collaborate effectively are going to be the ones who survive and thrive.  This doesn’t mean the end of competition. Pricing, structure, and service will always differentiate lenders. But in many cases, the firms that can put aside egos and focus on delivering the best solution for the borrower will come out ahead.

The Road Ahead