Asset Based Finance ABF
Asset Based Finance (ABF): Exploring the Size and Funding of the Asset Backed Credit Market
When it comes to financing, there are a variety of options available, and one of the most popular is asset based finance (ABF). ABF involves the use of tangible assets like real estate, inventory, or accounts receivable to secure a loan. It’s an attractive option for businesses, as it allows them to leverage their existing assets to access additional capital. But what is the size of the asset backed credit market, and how is it funded? In this article, we’ll explore the size and funding of the asset backed credit market.
What is Asset Based Finance?
Asset based finance (ABF) is a form of secured lending in which a lender provides funds on the basis of an asset or assets that are used as collateral. The lender has the right to seize the asset if the borrower defaults on the loan. This type of financing is often used by businesses that don’t have access to traditional forms of financing or need to quickly raise funds. It’s also attractive to lenders, as the collateral provides them with some assurance that their funds will be repaid.
The Size of the Asset Backed Credit Market
Asset based finance has grown in popularity in recent years, as businesses look for alternative sources of financing. According to a report from Moody’s Investors Service, the global asset backed credit market was estimated at $1.2 trillion in 2019. This figure is expected to continue to grow, as more businesses turn to asset based financing to access the capital they need to expand and grow.
How is the Asset Backed Credit Market Funded?
The asset backed credit market is funded by a variety of sources, including banks, asset-backed securities, and private lenders. Banks are one of the most common sources of funding for asset-backed loans. Banks are able to offer competitive rates and terms, as they have access to larger pools of capital. Asset-backed securities (ABS) are another source of funding for asset-backed loans. ABS are a type of debt instrument that is backed by a pool of assets, such as mortgages or auto loans. Private lenders are another option for businesses looking to secure asset-backed financing. Private lenders are often willing to take more risks than banks, and they can provide more flexible terms and conditions.
The Benefits of Asset Based Finance
Asset based finance can provide businesses with a number of benefits, including access to capital, flexibility, and cost savings. By leveraging their existing assets, businesses can access the capital they need to grow and expand. Asset based financing is also flexible, as lenders can customize the terms to meet the needs of the borrower. In addition, asset based loans typically have lower interest rates than other forms of financing, which can help businesses save money in the long run.
Conclusion
Asset based finance is a popular option for businesses looking for alternative sources of financing. The global asset backed credit market is estimated at $1.2 trillion, and it is expected to continue to grow. Asset backed financing is funded by a variety of sources, including banks, asset-backed securities, and private lenders. It can provide businesses with access to capital, flexibility, and cost savings.
