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SFNet 2023 Market Sizing Study Documents a Mammoth-Sized $4.866-Trillion U.S. Secured Finance Market
June 6, 2023
By Secured Finance Network
JUNE 6, 2023-The reach of secured financing: cash and liquidity for over 1 million U.S. businesses; funds for about one-third of the roughly 4.6 million U.S. firms with at least two employees
The Secured Finance Network’s (SFNet) new Secured Finance Market Sizing and Impact Study reports that the total secured financing volume of transaction flows to U.S. commercial businesses in 2022 was nearly $4.9 trillion. In other words, the scope of this market, which comprises seven major financing categories, “underpins, either directly or indirectly, over one-fifth of…the transaction volumes that make up the $23 trillion in U.S. Gross Domestic Product (GDP),” according to the study.
Published by the Secured Finance Foundation, a non-profit affiliate of SFNet dedicated to educating and developing the secured finance community’s future leaders, the Study surveyed a variety of industry participants – including lenders, finance companies and service providers – and relied upon data from third-party providers and publicly available information.
“Part primer, part data compilation and part analytical assessment, the Study provides the reader with a view into the highly interconnected components of the secured finance network and their collective impact on capital deployment and economic development,” explained Richard Gumbrecht, CEO of the Secured Finance Network. “The findings dimension an industry that is far-reaching, influential, and thriving, and one that presents significant growth opportunities for its participants to expand their served and available markets.”
Study highlights:
• There are seven specific – albeit interrelated – major sectors within the secured finance market: asset-based lending (ABL), factoring, supply chain finance, equipment finance and leasing, leveraged lending, cash flow lending, and asset-backed securitization. There are about 60,000 people who are directly employed in either providing or supporting secured financing transactions.
• The market is being impacted by several key trends: widening product variations, especially in supply chain finance; broader understanding and applications of ABL, factoring and supply chain finance; the presence of smart contracts and AI-enabled transaction activity; increased regulatory-driven reporting; and the growth in private credit’s share of the broadly syndicated market.
Market segment performance:
• Asset-Based Lending. ABL commitments by U.S. lenders totaled about $502.3 billion by the end of 2022, a 10% increase over the previous year. Transaction volumes in the syndicated market hit a record $160.2 billion on 350 loans in 2022, raising the average syndicated ABL deal to $458 million. That growth paralleled fears about a recession, which tends to be typical for ABL commitments. In the past six years, large ABL lenders have increased their market share of overall commitments from 31% to 38%. In the past four years, non-banks have grown their market share from 4.0% ($15.8 billion) to 4.5% ($22.7 billion). In the near-term, several factors should boost ABL loan growth, including economic uncertainty, restrained default rates, international acceptance of ABL, and ABL lenders’ willingness to finance more types of businesses.
• Factoring. As many as 900 U.S. factors generate $151 billion in factoring volume annually. Going forward, demand for factoring should be driven by the growth of micro, small and medium enterprises, as well as economic volatility. However, the increased availability and appeal of alternative financing vehicles, such as sales-based finance and payables finance, could hamper the market’s expansion.
• Supply Chain Finance. Because this market, comprising about $981 billion in annual transaction flows, continues to be impacted by pandemic aftereffects, the war in Ukraine, supply chain shortages and climate change, it has adjusted by diversifying sourcing on both a suppliers and geographic basis. It’s expected that the continuing high costs of capital will spur supply chain finance in the near-term.
• Equipment Finance and Leasing. Private-and-public sector organizations that purchased about $2 trillion in equipment and software in 2022 (approximately 8.5% of GDP) funded almost 60% of that volume through leases, loans or lines of credit, making equipment finance a $1.25 trillion market in the U.S., according to an analysis by the Equipment Leasing and Finance Association (ELFA) Foundation. The ELFA research found that businesses most often used leases (26%), secured loans (19%) and lines of credit (17%) for these acquisitions. The ELFA also sees this market benefitting from investments in labor-saving equipment, government-financed infrastructure projects, and climate-related financing.
• Leveraged Lending. The total par of outstanding leveraged loans was approximately $4.27 trillion by the end of 2022. This segment of the market is substantially larger than that of broadly syndicated leveraged loans (BSL), which totaled $1.42 trillion at year’s end.
• Cash Flow Lending. By the end of 2022, there were 2,105 borrowers holding $2.8 billion of outstanding of investment-grade cash flow loans. The overwhelming majority of these loans -- 83.6% -- were a revolving line of credit or a loan of one year or less.
• Asset-Backed Securitization. Total outstanding asset-backed securities (ABS), at $1.58 trillion at the close of 2021, hadn’t changed significantly a year later. Issuance volume, at $303 billion by year-end 2022, was down 48%, from $582 billion a year earlier. Only credit card receivables-backed ABS increased in 2022. Outstanding ABS have posted only a 2.4% compound annual growth rate (CAGR) since 2012, with the current lackluster market a function of investor concerns about a possible recession’s impact on ABS securities and a general falloff in loan growth volume.
Additional observations:
• While secured finance can’t relieve the extraordinary stresses and instability impacting the banking system in 2023, it’s one of the safest types of lending because of its connection to collateralized legally-binding agreements.
• Secured finance becomes very important when the borrowers involved have weak credit or otherwise instill little confidence in their ability to repay. Small companies particularly may benefit from secured finance, and the likely structuring of credit agreements that are inherent in secured finance may provide borrowers with flexible terms that simultaneously require payment discipline.
• Interconnectedness is a core feature of the secured finance market. It creates a versatility that allows financing products and structures to be complementary, interchangeable or transitional, depending upon the borrower’s profile or the life cycle stage of an asset.
About the Secured Finance Network
Founded in 1944, the Secured Finance Network, Inc. (SFNet) is the international trade organization representing the asset-based lending, factoring, trade and supply chain finance industries, with over 1,000 member organizations throughout the US, Canada and around the world. SFNet provides education, networking opportunities and industry advocacy to the global secured finance community. For more information, please visit sfnet.com.
About the Secured Finance Network Foundation
The Secured Finance Foundation exists to cultivate education, innovation and charitable works for the betterment of the secured finance community. As a separate entity from the Secured Finance Network, the foundation is a 501(c)(3) organization that funds crucial initiatives benefiting secured lenders worldwide. For more information or to make a donation, please visit sfnet.com.
MEDIA CONTACT:
Michele Ocejo
Director of Communications
Secured Finance Network
mocejo@SFNet.com
SFNet.com
The Secured Finance Network’s (SFNet) new Secured Finance Market Sizing and Impact Study reports that the total secured financing volume of transaction flows to U.S. commercial businesses in 2022 was nearly $4.9 trillion. In other words, the scope of this market, which comprises seven major financing categories, “underpins, either directly or indirectly, over one-fifth of…the transaction volumes that make up the $23 trillion in U.S. Gross Domestic Product (GDP),” according to the study.
Published by the Secured Finance Foundation, a non-profit affiliate of SFNet dedicated to educating and developing the secured finance community’s future leaders, the Study surveyed a variety of industry participants – including lenders, finance companies and service providers – and relied upon data from third-party providers and publicly available information.
“Part primer, part data compilation and part analytical assessment, the Study provides the reader with a view into the highly interconnected components of the secured finance network and their collective impact on capital deployment and economic development,” explained Richard Gumbrecht, CEO of the Secured Finance Network. “The findings dimension an industry that is far-reaching, influential, and thriving, and one that presents significant growth opportunities for its participants to expand their served and available markets.”
Study highlights:
• There are seven specific – albeit interrelated – major sectors within the secured finance market: asset-based lending (ABL), factoring, supply chain finance, equipment finance and leasing, leveraged lending, cash flow lending, and asset-backed securitization. There are about 60,000 people who are directly employed in either providing or supporting secured financing transactions.
• The market is being impacted by several key trends: widening product variations, especially in supply chain finance; broader understanding and applications of ABL, factoring and supply chain finance; the presence of smart contracts and AI-enabled transaction activity; increased regulatory-driven reporting; and the growth in private credit’s share of the broadly syndicated market.
Market segment performance:
• Asset-Based Lending. ABL commitments by U.S. lenders totaled about $502.3 billion by the end of 2022, a 10% increase over the previous year. Transaction volumes in the syndicated market hit a record $160.2 billion on 350 loans in 2022, raising the average syndicated ABL deal to $458 million. That growth paralleled fears about a recession, which tends to be typical for ABL commitments. In the past six years, large ABL lenders have increased their market share of overall commitments from 31% to 38%. In the past four years, non-banks have grown their market share from 4.0% ($15.8 billion) to 4.5% ($22.7 billion). In the near-term, several factors should boost ABL loan growth, including economic uncertainty, restrained default rates, international acceptance of ABL, and ABL lenders’ willingness to finance more types of businesses.
• Factoring. As many as 900 U.S. factors generate $151 billion in factoring volume annually. Going forward, demand for factoring should be driven by the growth of micro, small and medium enterprises, as well as economic volatility. However, the increased availability and appeal of alternative financing vehicles, such as sales-based finance and payables finance, could hamper the market’s expansion.
• Supply Chain Finance. Because this market, comprising about $981 billion in annual transaction flows, continues to be impacted by pandemic aftereffects, the war in Ukraine, supply chain shortages and climate change, it has adjusted by diversifying sourcing on both a suppliers and geographic basis. It’s expected that the continuing high costs of capital will spur supply chain finance in the near-term.
• Equipment Finance and Leasing. Private-and-public sector organizations that purchased about $2 trillion in equipment and software in 2022 (approximately 8.5% of GDP) funded almost 60% of that volume through leases, loans or lines of credit, making equipment finance a $1.25 trillion market in the U.S., according to an analysis by the Equipment Leasing and Finance Association (ELFA) Foundation. The ELFA research found that businesses most often used leases (26%), secured loans (19%) and lines of credit (17%) for these acquisitions. The ELFA also sees this market benefitting from investments in labor-saving equipment, government-financed infrastructure projects, and climate-related financing.
• Leveraged Lending. The total par of outstanding leveraged loans was approximately $4.27 trillion by the end of 2022. This segment of the market is substantially larger than that of broadly syndicated leveraged loans (BSL), which totaled $1.42 trillion at year’s end.
• Cash Flow Lending. By the end of 2022, there were 2,105 borrowers holding $2.8 billion of outstanding of investment-grade cash flow loans. The overwhelming majority of these loans -- 83.6% -- were a revolving line of credit or a loan of one year or less.
• Asset-Backed Securitization. Total outstanding asset-backed securities (ABS), at $1.58 trillion at the close of 2021, hadn’t changed significantly a year later. Issuance volume, at $303 billion by year-end 2022, was down 48%, from $582 billion a year earlier. Only credit card receivables-backed ABS increased in 2022. Outstanding ABS have posted only a 2.4% compound annual growth rate (CAGR) since 2012, with the current lackluster market a function of investor concerns about a possible recession’s impact on ABS securities and a general falloff in loan growth volume.
Additional observations:
• While secured finance can’t relieve the extraordinary stresses and instability impacting the banking system in 2023, it’s one of the safest types of lending because of its connection to collateralized legally-binding agreements.
• Secured finance becomes very important when the borrowers involved have weak credit or otherwise instill little confidence in their ability to repay. Small companies particularly may benefit from secured finance, and the likely structuring of credit agreements that are inherent in secured finance may provide borrowers with flexible terms that simultaneously require payment discipline.
• Interconnectedness is a core feature of the secured finance market. It creates a versatility that allows financing products and structures to be complementary, interchangeable or transitional, depending upon the borrower’s profile or the life cycle stage of an asset.
About the Secured Finance Network
Founded in 1944, the Secured Finance Network, Inc. (SFNet) is the international trade organization representing the asset-based lending, factoring, trade and supply chain finance industries, with over 1,000 member organizations throughout the US, Canada and around the world. SFNet provides education, networking opportunities and industry advocacy to the global secured finance community. For more information, please visit sfnet.com.
About the Secured Finance Network Foundation
The Secured Finance Foundation exists to cultivate education, innovation and charitable works for the betterment of the secured finance community. As a separate entity from the Secured Finance Network, the foundation is a 501(c)(3) organization that funds crucial initiatives benefiting secured lenders worldwide. For more information or to make a donation, please visit sfnet.com.
MEDIA CONTACT:
Michele Ocejo
Director of Communications
Secured Finance Network
mocejo@SFNet.com
SFNet.com