SG Credit Partners
Picture it: the founding fathers of asset-based lending emerge from a time portal shocked to see invention of email and the internet let alone something now called AI. Instead of their old ABL tools they find a kaleidoscope of data dashboards, private credit funds, and litany of look-alike lender decks. Beside them? A shagadelic figure in velvet, Austin Powers, grooving like it’s 1967, yet bewildered by the sophistication and sameness of modern ABL. If the early creators of ABL who were the architects of borrowing bases, collateral advance rates, and structural discipline were transported here, their first question might be as simple as it is sharp: “Where’s the edge?”
In the beginning, the world of ABL was pretty straightforward, but not simple. A handful of firms dominated because they understood the product and the industry. Their advantage wasn’t just a product; it was perspective, experience, and the apprenticed craft of interpreting collateral value in an era before templated methodologies and ubiquitous third-party support.
Capital was scarce, data was scarce, and if you wanted insight you had to cultivate it internally through deep relationships, proprietary interpretation of borrower realities, and a willingness to sit in the room and understand a business beyond its reported numbers. The early ABL world was anything but commoditized; success was rooted in expertise, intuition, and honest risk engagement.
Margins reflected that. In the early days, firms could command returns that today would be laughed at given the returns. Borrowers knocked on doors because you knew how to structure something they genuinely needed. Repeat that a few hundred times and what emerges is not a copy-cat system; it’s an identity. That was ABL.
Fast forward to today – and baby, the scene has changed. Nowadays, most lenders have the same cost of capital, the same range of pricing, the same spread, and often the same structures served up in similar templates. Lender personas vary, but the underlying economics are stunningly similar. When virtually every firm sources capital from large allocators with uniform targets, your edge isn’t found in where you borrow from, but rather how you think about what you do with it.
This commoditization isn’t accidental – it’s the direct result of capital flowing to where returns can be standardized and risk can be sliced, diced, and scaled across portfolios. The skill has shifted from bespoke underwriting to the goal of mass deployment. With the exception of a few old school leaders, today’s ABL looks more like a factory producing commodity risk-adjusted returns than a guild crafting tailored credit relationships. It’s a telling evolution, and the founding fathers would notice it immediately.
And then… there’s Dr. Evil.
No, not the miniature-shark-in-a-glass villain – but the advisors who often behave like him: pushing for terms that seem more fantasy than finance, requesting term sheet provisions that read like ransom demands, and demanding pricing outcomes untethered to underlying economics. In the earliest days of ABL, advisors served a different purpose – they clarified risk, translated borrower ambitions into credible structures, and helped markets grow responsibly. Today’s version sometimes seems like an evil twin: “I want 42 covenants and infinite flex – and I want them now!” Only to shrug when the economics don’t support the asks.
That’s the twist. It isn’t that advisors are villains by nature; it’s that competitive pressure and the desire to stand out in a crowded market occasionally pushes them into Dr. Evil territory – crafting unrealistic requests that stretch beyond what the capital actually supports. Whether driven by pitch dynamics, market noise, or simple enthusiasm, these demands introduce inefficiencies and misalignments that did not define the earliest era of ABL.
What would the founding fathers make of information symmetry today? On one hand, they’d appreciate the transparency: real-time data, third-party appraisals, automated reporting – all things they could only dream of. On the other hand, they’d see the cost: when everyone has the same toolkit and models, no one really has a proprietary insight anymore. Competition becomes zero-sum, and pricing pressure flattens the very skill set that once made ABL unique.
Let’s talk consolidation. What was once a handful of dominant firms has blossomed into a sprawling universe of lenders – banks, non-banks, private credit funds and new entrants entering all the time (the latest being appraisers). Some see scale; others see crowding. The founding fathers would likely call it what it is: an evolution catalyzed by capital abundance and risk appetite, rather than by foundational product innovation.
So what would Austin Powers himself say, if he time-travelled into today’s ABL world?
After adjusting his cravat and scanning the room full of indistinguishable lender decks, he’d smirk and declare:
“It’s my bag, baby… but everyone’s borrowing it!”
And that, in essence, captures the paradox of today’s asset-based lending landscape: a discipline that has mastered standardization yet struggles to retain the craft and differentiation that once defined it.
In the end, the opportunity and perhaps the challenge for the next generation of ABL players is to reintroduce true specialization, disciplined risk thinking, and creative structures that go beyond templated responses. That’s how you make ABL your bag again. Embrace technology, embrace data – but don’t let commoditization be the only narrative.
Austin might wink, Mini-me might nod, and the founding fathers would likely offer a sly smile. Because while the world has changed dramatically, the core essence of ABL – disciplined lending against real assets with real risk is still as relevant as ever.
And baby? That’s something worth time-traveling for.
