Capital Markets

Have Assets, Will Borrow

Despite credit-market weakness, asset-based lending surges 5.6 percent in first quarter, a survey of commercial-finance lenders shows.
Stephen TaubMay 15, 2008

Asset-based lending is on the rise, despite the global credit crunch.

Total committed credit lines swelled by 5.6 percent in the first quarter after growing by 4.4 percent in the fourth quarter of 2007, according to a quarterly study released by the Commercial Finance Association (CFA).

The CFA noted that while many lending institutions have taken a more cautionary approach to extending credit, CFA member companies appeared not to be saddled with self-imposed constraints that limited their ability to provide funding to businesses.

With asset-based lending, collateral can cover a wide range, including accounts receivable, inventories, intellectual property, equipment, and real estate.

“Certainly, the current credit environment is on the minds of business owners throughout the world,” said Andrej Suskavcevic, the CFA’s chief executive. “However, our quarterly index is proof positive that capital is available to companies that have assetsÂ…to secure a loan.”

The quarterly index found that 75 percent of reporting lenders experienced an increase in total credit commitments. In addition, reporting lenders reported that credit line utilization in the first quarter rose 2.2 percentage points, to 51 percent.

The survey was conducted by market research firm R.S. Carmichael & Co., to measure business growth, credit commitment, credit line utilization, and portfolio performance among the 20 largest CFA members engaged in asset-based lending.