Banks and independent lenders experienced little impact to their credit commitments in 2020, making it one of the few areas of the financial services industry largely unaffected by the COVID-19 pandemic, according to cumulative 2020 data from the Secured Finance Network’s Annual Asset-Based Lending Survey. The survey of 34 asset-based lenders further revealed that while this indicator of asset-based lending in 2020 remained largely unchanged from 2019, other indicators logged significant declines in 2020.
The study noted that asset-based lenders in recent times have benefited from a strong economy, low default rates, an abundance of complementary capital and easing regulatory hurdles. Historically, the ABL market also has been resilient during times of economic uncertainty.
“These numbers were atypical for asset-based lending, which normally experiences significant growth in times of economic stress as borrowers leverage these financial lifelines,” Richard D. Gumbrecht, CEO of SFNet, said. “A combination of disrupted demand, strong debt issuances and a flood of federal relief funding tempered growth in this asset class in the short term, while ABL remains a crucial source of capital on the path to recovery.”
According to the survey, the $273.9 billion in total credit commitments by ABLs in 2020 increased just 2% compared with the $268.6 billion in total credit commitments recorded for 2019.
Total asset-based loans outstanding decreased by 21.3% compared with 2019 levels, falling from a total of $105.4 billion in outstanding asset-based loans in 2019 to $82.9 billion in 2020. Credit line utilization experienced a similar decline, dropping by 990 basis points from 2019 to 2020, with 39.8% of 2019 survey respondents reportedly utilizing their credit lines compared with 29.9% of respondents in 2020.
Employment by asset-based lenders also declined between 2019 and 2020. According to the 34 survey respondents, total reported ABL employees decreased 21.2% in 2020 from 2,301 employees in 2019 to 1,813 in 2020.