The Secured Finance Network (SFNet) recently released its Q1/ 25 Asset-Based Lending Index and Lender Confidence Index, offering a snapshot of how the industry weathered recent trade policy volatility during the first quarter of this year.
According to the Q1 index, both bank and non-bank lenders saw lender confidence fall to neutral territory. The confidence of banks dropped 14.1 points to 49.1, while non-banks slid 12.5 points to 52.5, a sizable decline that is comparable to the drop in confidence in the first quarter of 2020.
“Substantial changes in trade policy have played a pivotal role in shaping U.S. economic activity in early 2025, and the resulting distortions have complicated efforts to clearly assess the economy’s true performance,” said SFNet CEO Rich Gumbrecht.
The first quarter of 2025 was a relatively quiet one for banks and non-banks:
- Total commitments for banks fell 1.7%; total commitments for non-banks fell 2.2%
- New outstandings for banks rose 9.8%; new outstandings for non-banks plunged 57.4%
“New outstandings” refers to new amounts of money that a borrower has drawn or borrowed under the ABL facility during a specific period. The sharp difference between outstandings for banks and non-banks stems from the timing of when new deals will be available in the non-bank world, and many rely on deals from banks which didn’t materialize.
Bank portfolio performance was mixed in the first quarter. Non-accruals rose but remained within their historical range and write-offs were muted, but criticized loans – which have elevated credit risk – as a share of outstandings edged down 180 basis points. Credit performance within the ABL industry has typically been strong and is slowly returning to pre-pandemic levels.
Non-bank portfolio performance was mostly stable. Criticized loans and non-accruals climbed higher but write-offs improved, declining as a share of outstandings.
“Although signs point to a slowdown in economic activity and ABL lenders expect both business conditions and portfolio performance to decline, the industry’s strong historical performance during past downturns provides confidence that lenders are well-prepared to navigate potential challenges ahead,” said Gumbrecht.
The Q1/25 Asset-Based Lending Index and Lender Confidence Index are based on survey data from leading bank and non-bank lenders. Full quarterly and annual data reports are available at: SFNet Asset-Based Lending & Factoring Surveys.
