The quiet record in asset finance

SME asset finance reached £23.5bn of new business in 2024, matching the record set in 2023, with non-bank lenders supplying over a third of the market. For a lower-mid-market company with meaningful plant, receivables or stock, asset-based lending can unlock more headroom at a lower margin than a cash-flow facility. It is also the part of the funding toolkit that borrowers most consistently overlook.

The story of the UK debt market in recent years is usually told as a private-credit story: funds displacing banks, unitranche replacing senior-plus-mezz, deals running through a whole new class of non-bank capital. That is accurate. But alongside it, quieter and less remarked upon, asset finance has been compounding steadily upward. The lender base within it has diversified in much the same way.

How large is the asset finance market, and where did the growth come from?

On the Finance & Leasing Association’s series for deals up to £20m, the relevant cut for the lower-mid-market, new asset finance business fell to £16.0bn in the Covid year of 2020, then recovered sharply. By 2021 it was back to within 1% of the pre-Covid peak. By 2023 and 2024 it had passed it, reaching £23.5bn — a 47% rise from the 2020 trough. That is not cyclical bounceback; it is structural growth in the use of asset-backed finance across sectors that historically leaned on cash-flow credit.

The growth reflects two things happening at once. On the demand side, businesses investing in new equipment, from commercial vehicles to manufacturing machinery to IT infrastructure, increasingly prefer to fund those assets off the balance sheet through hire purchase or finance lease rather than drawing on their main bank facility. On the supply side, a wider lender base means pricing is more competitive and credit committees more willing to advance against assets that a high-street bank’s standard model finds awkward to underwrite.

Who is actually lending, and does it matter?

By 2023, the British Business Bank estimated that around 37% of SME asset finance new business was supplied by non-bank lenders: specialist finance houses, captive manufacturer programmes and independent asset-finance providers sitting outside the clearing bank and challenger-bank categories entirely. That share held at 37% in 2024 even as total market volumes plateaued, confirming that non-bank participation has become a structural feature of the market rather than a cyclical gain.

The 2023 and 2024 values are published BBB figures. The 2020–2022 points are modelled on the upward trend the British Business Bank describes for those years; exact annual shares were not published.

The practical implication is the same one that applies across the UK lending market: a borrower who only approaches their clearing bank for asset finance is searching a minority of the supply. Equipment manufacturers’ captive finance programmes, specialist banks with dedicated asset-finance arms such as Paragon, Close Brothers, and Shawbrook, and a growing pool of independent non-bank providers all operate in the same space with different appetite, advance rates and pricing disciplines. The right lender for a given asset portfolio is rarely the most familiar one.

Where does ABL fit, and when is it the sharper tool?

Asset finance and asset-based lending sit on different parts of the same balance-sheet logic. Asset finance is transactional: it funds a specific item of plant or equipment, with the lender holding security over that asset through the facility life. ABL is structural: a revolving credit secured against the whole collateral pool, typically trade receivables, finished goods stock and fixed plant, with availability moving up and down as the pool does.

For a manufacturing or distribution company with a large debtor book, ABL can generate materially more headroom than a cash-flow facility sized against EBITDA. A £5m EBITDA business might borrow 3.0x on a cash-flow senior: £15m. The same business with £20m of trade receivables and £8m of stock could access a comparable or larger facility against those assets at a lower margin, because the lender is pricing collateral quality rather than earnings risk. The two structures serve different purposes, but for the asset-rich company the ABL option often costs less.

What should a CFO actually consider?

Asset finance and ABL tend to be underthought at the point of initial funding, partly because the cash-flow term loan is the default template that advisers and banks lead with, and partly because the structuring work required to size an ABL facility (collateral audits, concentration limits, dilution haircuts) adds a step that borrowers understandably want to avoid when a simpler facility is available.

That calculation changes at the lower-mid-market level, where EBITDA multiples are tighter and lenders more conservative about unsecured exposure. A business with plant on the balance sheet, a clean debtor book and predictable stock cycles should model both structures before committing: the ABL may be cheaper, and it may give more headroom for the next acquisition or working-capital swing than the cash-flow lender is prepared to provide. Running the two in parallel, as a mixed or hybrid facility, is a structure that several specialist lenders actively prefer.

The broader lesson from the asset finance data is that this part of the market has deepened consistently, across the rate cycle, and is not a niche product for a specific sector. Plant-heavy businesses across manufacturing, logistics, professional services and construction are all active participants, and the lender base is wider than most finance directors realise. Treat it as a standard part of the funding review, not a fallback for when the bank says no.