Stef’s market update – May 2026 – the reasons that asset-based lending is seeing strong demand

Asset-based lending has been very busy for us over the last couple of months and we’re seeing far more businesses start to look at it properly rather than treating it as a niche product.

A lot of firms are still dealing with high borrowing costs, tighter cash flow and banks being far more selective than they were a few years ago. Because of that businesses are looking for funding that gives them flexibility and room to operate rather than rigid structures that can become restrictive quite quickly.

We’ve seen particularly strong demand from manufacturing, distribution and engineering businesses especially those carrying stock or waiting longer to get paid by customers. In many cases firms are using asset-based lending alongside existing facilities to improve working capital and support growth plans.

One thing that has definitely changed is lender appetite. Traditional banks are still active but they are being more cautious and focusing heavily on stronger existing relationships. Independent and specialist lenders are moving quickly and often showing more flexibility around structure and timing.

We’re also seeing lenders pay closer attention to the quality of debtor books, stock values and overall security. Deals are still getting done but preparation matters more than ever. Businesses with clear numbers, strong reporting and a good understanding of their cash flow tend to get much better engagement from funders.

Interestingly, a lot of the work coming through is from businesses reviewing historic facilities, refinancing expensive debt or looking for more breathing room as they grow. We’ve had a number of conversations recently where firms simply outgrew the structure they originally put in place.

I think that trend will continue through the rest of 2026. There’s still pressure in the wider economy and funding costs remain high, so businesses are being more careful about how they structure debt. Asset-based lending gives many firms a more flexible way to fund growth without putting unnecessary strain on cash flow.

For the right business, it can be a really strong option.