Is 2025 the year ABL finally takes centre stage?

As we all get back from our summer breaks, the next few months promise to be an active time for the Asset Based Lending and Invoice Finance (ABL/IF) market as it continues through the last quarter of 2025 with a blend of momentum, pressure and promise. For lenders, the challenge is fierce competition; for borrowers, there is greater choice and for advisers like us, the opportunity lies in helping both sides navigate a financing landscape that, whilst increasingly complex, is rich in potential.

Competition in Every Corner

The debt markets remain awash with capital. Large credit funds that once focused on the upper mid-market are moving down to hunt for smaller transactions competing with traditional ABL players. These include private credit providers (family offices are in here too), fintech challengers and independent lenders. In this environment, many lenders are chasing too few deals, heightening competition on pricing, terms and speed. We are even hearing of several teams looking to launch new ABL/IF companies in the very near future.

Borrowers have noticed. They are increasingly focused on accessing “the biggest bucket of cash, as cheaply, as simply and as quickly as possible.” Smaller equity stakes, larger cashflow loan elements and cheaper pricing are on the list of “wants” of borrowers.

For smaller or specialist lenders, the task of standing out is becoming harder – USPs simply do not exist in this market. Some will adapt their offerings; others may struggle to maintain visibility in a crowded field and their long-term viability comes into question.

Private Credit Meets ABL

One of the most significant shifts is the growing overlap between ABL and private credit. A recent series of articles in The Times covers the private credit fund market very well and suggests that of an estimated $250bn extended by private credit across Europe, two-thirds is lent in the UK. 

Private credit partnered with ABL, as a hybrid structure, is no longer a rarity; they are a mainstream feature of mid-market financing. Borrowers are benefiting from:

• Higher leverage leading to bigger ticket sizes through blended structures.
• Faster execution, thanks to private credit’s streamlined, single-lender approach.
• More resilient solutions, combining ABL’s asset focus with cashflow or term debt.

For ABL lenders, this convergence brings both opportunity and risk. Whilst they can attract private equity sponsors and corporates looking for efficient structures - they must also guard against being undercut by looser covenant packages or higher leverage offered elsewhere. The sheer volume of funds available may have the effect of pushing standards down as lenders stretch to win deals.

Demand Drivers: Uncertainty and Opportunity

Uncertain economic conditions are shaping the market as much as liquidity is. With GDP forecasts being revised downwards, higher wage and tax costs squeezing profits, and many firms facing constrained cashflow, demand for flexible and ABL-type facilities is growing.

ABL is especially well suited to periods of uncertainty. By focusing on tangible assets rather than volatile earnings, lenders can provide facilities that remain robust even when profitability is under pressure. This is increasingly attractive to private equity firms, which are seeking ways to recycle capital, fund carve-outs or support portfolio companies without leaning heavily on equity.

At the same time, distressed and restructuring scenarios are fuelling demand. ABL is frequently being deployed to unlock liquidity when cashflow-based lending is no longer viable. This resilience is reinforcing its reputation as a first-choice product in refinancing, M&A and restructuring alike.

Areas of Growth and Innovation

Despite its maturity, the ABL market still has room to expand. Several themes stand out:

• Broader collateral pools: There is increasing interest in securing facilities against intellectual property, intangible assets and even green assets and adopting a “Borrowing Base” approach.
• Technology adoption: AI, blockchain and advanced data analytics are being applied to underwriting, monitoring, auditing and asset valuation, improving both efficiency and transparency.
• Education and awareness: Advisers and lenders continue to see a need for borrower education. Many CFOs remain unfamiliar with ABL’s full potential, particularly compared to EBITDA-linked lending.
• Public policy support: Government schemes, such as those driven by the British Business Bank, are helping SMEs and mid-market firms gain access to ABL.

Risks and Realities

Yet the same dynamics that create opportunity also create risk. Profit warnings are on the rise, and sectors such as recruitment, logistics and manufacturing – heavy users of ABL – are facing strain. The possibility of increased restructuring activity in 2025 is real.
For lenders, this means rigorous due diligence is essential. More than ever, they must plan for both successful deployment of capital and for credible exit strategies. Early engagement with restructuring advisers, sector specialists and risk professionals is likely to be a defining feature of successful ABL platforms this year.

The Road Ahead

So where does this leave the market as the year moves into its final three months? A few conclusions seem clear:

In short, 2025 may turn out to be a defining year for asset-based lending in the UK. The sector is no longer a niche solution; it is central to how businesses unlock liquidity, weather volatility and fund their ambitions. In a crowded and challenging market, success will come not from chasing volume alone, it will come from marrying creativity with discipline too.

Working with ABLs

We work alongside Invoice Finance companies and their clients, or prospective clients, from the earliest point that a facility is being considered as a new deal, on existing deals and on exit. We offer:

• Pre-lend reviews
• Exit Planning
• Independent Business Reviews
• Accelerated M&A
• Restructuring and Turnaround Options
• Manage Aways
• Insolvency Solutions

A selection of our recent work for ABLs:

Placing value in our relationships - It’s not all a one way street….

Our Capital Advisory team has introduced significant levels of business across the Invoice Finance and Asset Based Lending market over the last 12 months.