ABL and Factoring Closed 2025 Strong — Here's What the Data Actually Shows

The headlines coming out of credit markets in late 2025 were not exactly cheerful. High-profile bankruptcies in private credit dominated the conversation. Bank lending continued to tighten. GDP growth in the fourth quarter came in at a sluggish 0.7%, dragged down by a federal government shutdown and softening consumer demand. Inflation hasn't fully let go. Interest rate expectations kept shifting.

And yet, quietly, the secured finance industry closed the year in a position of genuine strength.

The Secured Finance Network just released its 2025 Asset-Based Lending and Factoring survey results, and the numbers are worth sitting with, especially for anyone tracking where flexible, collateral-backed capital is flowing and how lenders are navigating an increasingly complex macro picture.

Factoring Had a Banner Year

The headline number from SFNet's year-end factoring survey is a 16.6% increase in factoring volume among respondents reporting in both H2 2024 and H2 2025. That's not a modest bump, that's meaningful sector-wide expansion in a year when plenty of other credit channels were either flat or contracting.

Both U.S. and international activity contributed to the growth. Total funds in use rose 4.1% among factors reporting across both halves of 2025. Average days sales outstanding edged up 1.3 days to 46.8, a slight lengthening that bears watching but doesn't signal any material stress in receivables quality.

Sentiment among factors remains firmly positive, though it did come down from the high-water mark of H1. The combined factoring sentiment score declined six points to 61 in H2 2025, still solidly in positive territory, with any score above 60 reflecting a constructively optimistic outlook. Confidence in portfolio performance improved slightly to 75, while views on general U.S. business conditions held neutral at 50, a reflection of the uncertain macro environment rather than any sector-specific concern.

The story factoring is telling is straightforward: when traditional bank lending pulls back, and businesses need liquidity against receivables, factors step in. That dynamic has been playing out consistently, and 2025 was no exception. The 16.6% volume growth suggests demand for this type of financing is not only intact, it's accelerating.

ABL: A Tale of Banks vs. Non-Banks

The asset-based lending picture is more nuanced, and the divergence between bank and non-bank performance is where the real intelligence sits.

On the bank side, Q4 was a mixed quarter. Total commitments rose a modest 0.5% from the prior quarter, essentially flat, but at least directionally positive. Total outstandings for banks declined 5.1% quarter over quarter, though SFNet attributes much of that to seasonal paydowns rather than any structural deterioration in demand. Bank portfolio performance was uneven: non-accruals and write-offs increased modestly, but criticized loans continued to trend downward, pointing toward ongoing normalization in credit quality rather than a fresh deterioration cycle.

Bank lender sentiment reflected cautious optimism. The combined sentiment score rose three points to 62, driven by improved expectations for business conditions, demand, and portfolio performance. That puts bank ABL lenders in a solidly positive posture heading into 2026.

Non-bank ABL performance told a more dynamic story. Total commitments for non-banks rose 5.5% in the quarter, and total outstandings surged 12.6%, a number that stands out against the broader backdrop of tighter credit conditions. Non-bank lenders are clearly filling a capacity that banks are not. That said, non-bank sentiment came down four points to 58, with softer outlooks on utilization, hiring, and portfolio performance tempering what was otherwise a strong quarter operationally. Criticized loans and non-accruals increased in non-bank portfolios, though write-offs as a share of outstandings held stable, suggesting disciplined underwriting is keeping pace with the volume growth.

The divergence here matters. Banks are holding commitments steady and managing credit normalization carefully. Non-banks are growing outstandings aggressively and absorbing more of the market's demand for flexible capital, but doing so against a slightly more cautious sentiment backdrop. That combination of strong origination and rising credit watchlist activity is worth monitoring closely over the next two quarters.

What This Means for the Broader Credit Picture

SFNet CEO Rich Gumbrecht framed the results precisely: "Credit conditions remain idiosyncratic, not systemic." That distinction is important. The data is not pointing to a sector-wide credit crisis, it is pointing to a market in which individual credits are being scrutinized more carefully, where some sectors and borrowers are feeling more strain than others, and where lenders are making deliberate choices about where and how to deploy capital.

That's a healthy credit environment, even if it's not a uniformly easy one.

The broader context reinforces why secured finance is holding up well. Private credit has grabbed enormous attention over the past three years, and much of that attention has recently turned negative, with questions about valuations, covenant-lite structures, and mark-to-market discipline in direct lending portfolios. Asset-based lending and factoring operate from an inherently different starting point; the capital is tied to specific, verifiable collateral. Receivables, inventory, equipment. When the collateral is real and the monitoring is rigorous, the performance is more stable. The 2025 data makes that case well.

The other structural tailwind is the ongoing pullback in traditional bank lending capacity for middle-market and smaller borrowers. As banks navigate tighter capital requirements and more conservative credit appetites, the addressable market for non-bank ABL and factoring continues to expand. Non-bank outstandings growing 12.6% in a single quarter is not a coincidence; it's a direct consequence of that dynamic.

Looking Ahead Through 2026

Lender confidence as we move deeper into 2026 is constructive but appropriately measured. Banks are watching their portfolios carefully while remaining optimistic about demand. Non-banks are growing into market opportunity while being clear-eyed about the credit normalization that's underway. Factors are riding a volume growth wave while keeping a neutral eye on macroeconomic conditions.