ABL Providers Capitalize on Longer PE Hold Periods

April 21, 2025

Asset-based lenders are seeing a surge in business as private equity firms continue to hold portfolio companies for record lengths, creating a significant financing gap that traditional lenders can’t fill.

According to McKinsey’s latest Global Private Markets Report, average PE hold times have stretched to 6.7 years—well above the 5.7-year average of the past two decades. Companies in PE ownership for more than four years now comprise 61% of all buyout-backed assets, up from 55% last year.¹

This trend is fueling explosive growth in the asset-based lending (ABL) market, which is projected to reach $1.26 trillion by 2028, according to Evalueserve.²

“ABL has matured as a product set and is very focused on working with the private equity community,” notes Andy Dimmock of FRP Advisory. “Although it is still a valuable option for turnarounds, it is now also a viable product for growth.”³

For PE portfolio companies in extended holding periods, ABL offers crucial advantages: fewer financial covenants than cash-flow loans, flexible funding based on asset value rather than EBITDA multiples, and often lower overall cost of capital.

Major players are moving quickly to capture this opportunity. PIMCO is raising a $4 billion ABL fund, having already secured half that amount from just two investors. Hudson Cove launched its inaugural ABL fund targeting £200 million last year.⁴

U.S. Bank reports that ABL is “especially attractive for companies experiencing significant transition, including high growth, acquisition, sale or dividend recapitalization”—precisely the scenarios many PE portfolio companies face during extended ownership periods.⁵

The shift reflects ABL’s evolution from its previous reputation as a distressed financing tool to a mainstream solution for healthy PE-backed companies needing growth capital beyond their funds’ typical investment horizons.

With 58% of institutional investors planning to prioritize ABL strategies this year according to Preqin surveys,⁴ and transaction sizes regularly reaching the £50-60 million range, asset-based lending appears positioned for continued strong growth as PE firms adapt to the new reality of longer holding periods.

Footnotes

1. “Global Private Markets Report 2025: Private equity emerging from the fog,” McKinsey, February 13, 2025, https://www.mckinsey.com/industries/private-capital/our-insights/global-private-markets-report ↩
2. “The Rising Popularity of Asset-Based Lending,” Evalueserve, May 13, 2024, https://www.evalueserve.com/blog/the-rising-popularity-of-asset-based-lending/ ↩
3. “Asset-based lending: how is it evolving?,” FRP Advisory, November 29, 2023, https://www.frpadvisory.com/insights/podcasts-and-webcasts/asset-based-lending-how-is-it-evolving/ ↩
4. “The growth of asset-based finance in private credit markets,” Macfarlanes Private Capital Solutions, https://www.privatecapitalsolutions.com/insights/the-growth-of-asset-based-finance-in-private-credit-markets ↩ ↩²
5. “ABL mythbusters: The truth about asset-based lending,” U.S. Bank, March 11, 2025, https://www.usbank.com/financialiq/plan-your-growth/loans/ABL-mythbusters-truth-asset-based-lending.html ↩