Introduction

In a financial world shaped by volatility, investors are increasingly searching for yield sources that combine stability with clear, measurable risk. Asset-Based Lending (ABL) is emerging as a powerful answer. By anchoring credit exposure to tangible assets, ABL provides investors with secured income streams and access to private credit markets that are often insulated from public market swings.

At Kingsbury & Partners, we believe understanding ABL is essential for investors who want to balance risk, diversify portfolios, and participate in the expanding world of private credit. This guide explains what asset-based lending is, why it matters, and how to navigate the opportunities and risks it presents.

What is Asset-Based Lending?

Asset-Based Lending is the practice of extending loans secured by assets such as:

  • Receivables: invoices, consumer credit, or trade finance flows
  • Real Estate: residential, commercial, or development properties
  • Inventory and Machinery: tangible collateral that holds operational value
  • Specialised Assets: intellectual property, loan portfolios, or alternative collateral

For investors, the attraction is clear: the underlying assets provide a safety net. If a borrower defaults, lenders can seize or liquidate the assets to recover funds. This reduces the risk profile compared to unsecured lending, while still providing attractive fixed-income returns.

Why Investors Should Consider Asset-Based Lending

Stable and Predictable Returns

ABL typically delivers consistent coupon payments. Many transactions are structured with quarterly or semi-annual interest, making ABL well suited to investors seeking regular income streams.

Secured Investments

The presence of collateral provides a cushion against borrower default. Even in challenging conditions, recovery rates are typically stronger than in unsecured credit.

Diversification Benefits

ABL is often less correlated with equity or bond markets. For High-Net-Worth Individuals (HNWIs) and institutional investors, this diversification can improve the portfolio’s efficient frontier, enhancing risk-adjusted returns.

Exposure to Private Credit Markets

The private credit market has grown into a $1.7 trillion industry (Preqin, 2024), with ABL making up a significant and expanding share. Demand for non-bank financing solutions continues to rise, creating a fertile ground for investors.

The Growing Demand for Asset-Based Lending

Stricter banking regulations post-2008 and post-pandemic liquidity squeezes have left many SMEs unable to access traditional bank credit. Private lenders, and by extension their investors, are filling this financing gap.

  • According to the Secured Finance Network, ABL commitments in the US reached nearly $500 billion in 2023, reflecting both borrower demand and investor appetite.
  • In Europe, the market is expanding rapidly as businesses adopt ABL to fund working capital, acquisitions, and restructurings.
  • Key growth industries include manufacturing, retail, logistics, and technology, all sectors with asset-heavy balance sheets.

For investors, this means exposure to a growing borrower base and opportunities to participate in essential economic activity.

Risks Investors Should Understand

While ABL offers attractive features, investors must weigh the risks carefully:

  • Asset Valuation Risk: Collateral such as receivables or inventory can lose value if mispriced or poorly managed.
  • Default Risk: Even with assets pledged, borrower distress can lead to delays or partial recovery.
  • Liquidity Risk: Some collateral takes time to liquidate, delaying investor repayment in the event of default.

What to Look for in an ABL Opportunity

When evaluating ABL opportunities, consider the following:

  • Quality of Collateral: Is the asset liquid, durable, and realistically valued?
  • Borrower Creditworthiness: Does the underlying business have stable cash flows and governance?
  • Loan Terms: Are covenants, repayment structures, and interest rates aligned with investor goals?
  • Manager Expertise: Does the lending partner have deep experience in asset valuation, structuring, and enforcement?
  • Governance Framework: Are risks overseen by a rigorous committee, such as Kingsbury & Partners’ Product & Risk Committee?

How Kingsbury & Partners Can Support You

At Kingsbury & Partners, we specialise in connecting investors with high-quality ABL opportunities. Every deal undergoes extensive due diligence and stress testing by our Product & Risk Committee, ensuring only robust structures reach investors.

By leveraging our platform, investors gain access to:

  • Direct Deals: Off-market transactions sourced through our global network
  • Institutional Infrastructure: Swiss ISINs, Bloomberg listings, and Euroclear/Clearstream settlement
  • Risk-Focused Approach: Every investment assessed with an emphasis on capital preservation and transparency

Whether you are an experienced allocator or exploring private credit for the first time, our team ensures your portfolio is positioned for stable, risk-adjusted returns.