Asset-based lending has undergone a quiet but significant transformation in recent years. Once viewed primarily as a capital source of last resort, used only when traditional cash flow-based financing wasn’t available, the asset class has evolved into a key player in the private credit universe.1 For investors seeking differentiated risk exposures, tighter collateral protections and portfolio diversification, ABL has increasingly become an area of interest — and for sponsors navigating complex acquisitions, understanding the ABL sales cycle provides competitive advantage.
2025 has been a successful year for the ABL market, demonstrated by strong activity levels and increased interest in asset-based lending products.2 In a competitive market for ABL funders, corporates have benefitted from lower pricing, larger single-hold levels and extras such as accordions. Deal sizes have increased due to flexibility around products on offer. Whether these favorable conditions will persist into 2026 remains to be seen, but for now borrowers are driving excellent deals.
Understanding the ABL Origination Timeline
ABL deals are fundamentally three-year commitments, compared to traditional middle market deals which are typically one to two-year commitments.3 This longer commitment provides more certainty to borrowers and eliminates the time-consuming process of restructuring deals every year or two. However, this stability comes with a more intensive upfront process.
The hands-on nature of ABL means that the real work begins after a deal is originated. For lenders, this has implications for platform design and specialized headcount — meaning that investors should look for lenders with deep experience in specific asset types and strong infrastructure for collateral verification.4 Unlike cash-flow loans which often rely on quarterly reporting, ABL facilities are monitored far more frequently. Asset quality checks and valuations may be updated weekly or monthly, and triggers can be tied to real-time asset performance.
The typical ABL sales cycle involves several distinct phases. Initial term sheet development typically requires 2-3 weeks as lenders assess collateral quality and structure. The field examination — critical to ABL underwriting — generally requires 3-4 weeks for domestic facilities, longer for cross-border deals. Documentation and legal review adds another 2-4 weeks. According to Secured Research analysis, sponsors who pre-position field exam readiness before launching processes can reduce overall cycle time by 25-30%.
Clearing Banks and Private Credit: The Competitive Landscape
The clearing banks have performed well in the ABL and invoice finance mid-market space in 2025, benefiting from the ability to offer competitive pricing together with the option to provide ABL alongside other banking products.5 Banks remain attractive propositions for borrowers seeking integrated relationships across multiple product lines.
However, there has been 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.6 Expectations are that these funds will become front and center in the challenge to win new ABL business in 2026. Private capital has played a critical role in the modern evolution of ABL — unlike banks, which typically operate under an “originate-to-distribute” model and are highly sensitive to regulatory capital requirements, private lenders tend to take a more customized and asset-focused view.
The hybrid ABL-private credit model represents the most significant structural innovation in middle market finance since the unitranche emerged in the late 2000s. According to Secured Research’s 2025 Market Outlook, “Firms that master these structures will command premium market positions regardless of credit cycle shifts.”7 Hybrid ABL-private credit facilities achieve 24% higher average advance rates while maintaining traditional ABL risk parameters, fundamentally expanding liquidity options for middle market borrowers.
Collateral Dynamics: What Sponsors Need to Know
A key development in the ABL space is the expanding menu of eligible collateral types. While traditional ABL was primarily tied to working capital — accounts receivable, inventory and occasionally equipment — or hard assets like real estate, today’s lenders have evolved their collateral set to include many esoteric assets.8 Modern ABL may be structured around healthcare receivables, drug royalties, life sciences receivables, recurring revenue streams from software and services businesses and other specialized assets.
Most middle market companies leverage primary assets with typical advance rates between 80% to 85% for accounts receivable and 50% for inventory.9 Companies seeking more availability from working capital fit the ABL profile — advance rates are higher against accounts receivable and inventory, providing more availability than traditional middle-market cash flow structures. Companies that are more asset-intensive will benefit from an asset-based structure rather than cash-flow financing.
ABL structures also require cash dominion — a controlled account agreement where receivables flow into a lockbox and funds are used to pay down revolving debt.10 This structural feature, while requiring more operational coordination, provides lenders with the monitoring capability that supports higher advance rates and more flexible covenant packages. Typically, a cash flow structure may have three or four financial covenants, while an ABL structure will have only one.
Landlord Waivers: The Emerging Challenge
Waivers from third-party landlords of premises holding a borrower’s inventory are becoming increasingly challenging to obtain. 2025 has seen an emerging pattern of hesitancy and reluctance from landlords to agree to such waivers, in many cases refusing to sign the documentation.11 As a result, funders are increasingly applying rent reserves to mitigate the lack of a landlord waiver, leaving borrowers needing to consider the impact on their availability under ABL facilities.
This challenge is expected to persist into 2026, so early engagement by debt advisors and corporates with landlords to smooth the way is likely to be increasingly beneficial. Sponsors pursuing ABL-financed acquisitions should factor landlord waiver negotiations into their deal timelines and consider the potential impact of rent reserves on ultimate availability.
Ecosystem Implications
For Private Credit Lenders and Specialty Finance Providers: The 47% increase in hiring of ABL professionals by private credit funds reflects recognition that operational understanding drives credit performance. Lenders building hybrid capabilities — combining traditional ABL discipline with private credit flexibility — command premium market positions. The evolution of collateral types has enabled private lenders to structure loans aligned with unique characteristics of specific industries.
For PE Sponsors: Understanding ABL sales cycle dynamics provides competitive advantage in asset-intensive acquisitions. Pre-positioning field exam readiness before launching processes can reduce cycle time by 25-30%. Asset-based lenders are more comfortable with leverage and are collateral-focused rather than leverage-focused — for companies in cyclical industries, ABL groups will work with them and be more patient than traditional cash flow structures, as long as they stay within the assets and have sufficient liquidity.12
For Investment Bankers: Advising clients on optimal capital structure increasingly requires ABL expertise. According to Secured Research, “Sponsors employing hybrid structures can support 0.5-0.7x higher entry multiples while maintaining traditional equity cushions, creating a significant competitive advantage in auction processes.”13 Investment bankers who understand both ABL mechanics and private credit dynamics can structure more attractive financing packages that differentiate their clients’ bids.
For Legal Advisors: ABL documentation complexity continues to increase. Paul Hastings notes their team works at the leading edge of ABL developments, advising on stretch pieces, IP in the borrowing base, cash in the borrowing base, seasonal businesses, split collateral, first-out/last-out facilities, FILOs, SISOs, super-seniors, guaranteed borrowing bases and synthetic borrowing bases.14 Legal advisors who specialize in these structures command premium positions in middle market transactions.
For Turnaround Advisors: ABL’s patient approach to distress creates opportunities for restructuring professionals. Asset-based lenders focus on collateral rather than leverage, providing runway for operational turnarounds that traditional cash-flow lenders would not support. According to U.S. Bank, “At the end of the day, ABL Lenders are looking to provide Borrowers with incremental liquidity that can be used for numerous purposes, including organic growth opportunities, acquisitions, dividend recaps, and turnaround strategies. The product provides the ultimate flexibility to Borrowers.”15
Looking Forward: Mainstreaming Asset-Based Solutions
ABL is no longer confined to distressed situations — it is being used proactively by public and private companies as well as by private equity sponsors seeking incremental liquidity or more flexible capital solutions.16 While not as large as direct lending in terms of AUM, ABL is now considered a mainstream financing tool that can enhance liquidity from working capital, offer structural alternatives to traditional debt, or support growth and M&A activity.
For dealmakers navigating 2025’s complex landscape, understanding the ABL sales cycle — from initial term sheet through field examination to closing — provides the foundation for maximizing leverage on asset-intensive acquisitions while maintaining the structural protections that both lenders and sponsors require.
Sources:
1. CAIA, Asset-Based Lending: Coming of Age in the 2020s, June 2025. https://caia.org/blog/2025/06/30/asset-based-lending-coming-age-2020s
2. Addleshaw Goddard, Asset-Based Lending Wrapped 2025. https://www.addleshawgoddard.com/en/insights/insights-briefings/2025/finance/asset-based-lending-wrapped-2025/
3. BizCap, What is Asset Based Lending. https://bizcap.com/how-companies-can-use-their-assets-to-finance-strategic-growth/
4. CAIA, Asset-Based Lending.
5. Addleshaw Goddard, Asset-Based Lending Wrapped 2025.
6. Ibid.
7. ABF Journal, The Convergence of ABL and Private Credit, August 2025. https://www.abfjournal.com/the-convergence-of-abl-and-private-credit-a-new-frontier-for-middle-market-liquidity-in-2025/
8. CAIA, Asset-Based Lending.
9. Popular Bank, Everything You Need to Know About ABL, July 2025. https://blog.popularbank.com/07-03-2025/asset-based-lending-abl/
10. BizCap, What is Asset Based Lending.
11. Addleshaw Goddard, Asset-Based Lending Wrapped 2025.
12. BizCap, What is Asset Based Lending.
13. ABF Journal, The Convergence of ABL and Private Credit.
14. Paul Hastings, Asset-Based Lending Practice. https://www.paulhastings.com/practice-areas/asset-securitization-and-structured-finance
15. U.S. Bank, ABL Mythbusters, December 2025. https://www.usbank.com/corporate-and-commercial-banking/insights/credit-finance/lending/ABL-mythbusters-asset-based-lending.html
16. CAIA, Asset-Based Lending.
