The Commercial Finance Association Education Foundation released the findings of a comprehensive study of the scope and impact of the secured commercial finance market in the U.S.
The 2019 Secured Finance Market Sizing & Impact Study, conducted with the assistance of Ernst & Young, was based on surveys of industry participants, in-depth interviews with subject matter specialists and data from a broad range of sources that track the loan markets.
“The results of this landmark study dimension for the first time the breadth, vitality and interconnectedness of the $4 trillion network of secured finance providers who deploy the capital that fuels our nation’s economy,” said Richard D. Gumbrecht, CEO of the Commercial Finance Association. “This study substantiates a number of never-before-available insights such as the size and characteristics of the market for non-syndicated asset-based lending which offers a lifeline to many small and medium-sized businesses and their employees.”
Report highlights and findings included, among other things:
- Providers of secured financing employ over 60,000 people and deploy capital to over 1 million U.S. businesses.
- The volume of U.S. secured financing for commercial entities was over $4 trillion in 2018, affecting either directly or indirectly about one-fifth of U.S. GDP.
- The study estimates $465 billion of ABL financing commitments in the U.S. as of year-end 2018, a 6% increase over 2017, with growth of 65 to 7% estimated for 2019. Losses on ABL loans have been less than five basis points in each of the past three years. The pace of non-syndicated loan growth has more than doubled that of overall commercial and industrial lending during the last four years. After several years of robust market conditions, survey participants have begun to express concerns about covenant-lite structures and diminishing credit protections—characterizing today’s conditions as “a borrower-driven market.”
- The volume of receivables purchased in factoring arrangements by some 900 U.S. factors was about $101 billion in 2018 and could grow in the low single-digit range in 2019, driven by strength in micro, small, and medium enterprises and expansion into nontraditional industry segments.
- U.S. private enterprises and public institutions acquired about $1.76 trillion in equipment and software in 2018, representing 8.5% of U.S. GDP. Nearly 60% of that purchase volume, or about $1.04 trillion, was financed by either lease, loan or line of credit financing. Growth in software purchases outpaced equipment by 200 basis points, underscoring the importance of this component of the equipment finance landscape.
- Combined, the secured finance types covered in the study provide financings to companies throughout their lifecycle, ranging from recourse factoring agreements for early-stage companies, ABL, leveraged loans and cash flow loans to higher performing companies. And other tightly monitored forms of secured loans for companies in need of a turnaround.
“This study will have a long-term impact as it will spawn more granular research at the industry, product and geographic level over the coming months and years” added Gumbrecht.
Founded in 1944, the Commercial Finance Association, soon to become the Secured Finance Network, is the international trade organization representing the asset-based lending, factoring, trade and supply chain finance industries, with over 1,000 member organizations throughout the U.S., Canada and around the world.