Asset-based lenders continue to fill the void for businesses in need of capital in the US.

The Commercial Finance Association (CFA) has released its Quarterly Asset-Based Lending Index, Q4 2008, revealing a 1.9% decrease in total credit commitments in the fourth quarter. According to the CFA, this slight decrease is not surprising considering the explosive and unprecedented growth the industry experienced in the two previous quarters. Furthermore, given the current economic climate, a virtually neutral change in loan volume confirms the unique stability of asset-based lending.

With regard to portfolio performance, results of the quarterly index indicate that the current economic slowdown finally caught up with reporting lenders in the fourth quarter. Lenders non-accruing loans as a percentage of their total asset-based loans outstanding were 34 basis points higher in the fourth quarter of 2008 and 50% of lenders reported an increase in non-accruals in the fourth quarter compared to the previous quarter. With respect to gross write-offs, 60% of lenders reported an increase in the fourth-quarter compared to 35% in the third-quarter but for all four quarters of 2008, total gross write-offs as a percentage of total asset-based loans outstanding at year end were still below 50 basis points, the asset-based lending industry’s median for the past 15 years.

“As other lending disciplines are literally in crisis mode, asset-based lending has remained a strong, steady and viable option for businesses struggling for working capital,” said Andrej Suskavcevic, CEO, Commercial Finance Association. “As many banks have had to virtually close their doors on even creditworthy businesses, our members continue to serve as a lifeline for the global economy. It is important to note that this is in large part due to the responsible way in which the asset-based lending industry operates.”

Despite the stability shown by asset-based lenders in the fourth quarter, the CFA continues to pay close attention to the current state of the credit markets, particularly as the economic stimulus plan is implemented.

“As the administration and congress continue to build upon the passage of the stimulus package and look for additional ways to spur the economy, it’s crucial that they don’t lose sight of the significant role non-bank regulated commercial lenders play in this economy,” said Andrej. “The ability to access capital among all commercial lenders, not just troubled companies, will help get the economy back on track much faster.”

The Quarterly Asset-Based Lending Index was conducted by R.S. Carmichael & Co, an independent market research firm, to measure business growth, credit commitment, credit line utilisation and portfolio performance of the 20 largest CFA members engaged in asset-based lending. The survey was commissioned by the Commercial Finance Association.

About CFA
Founded in 1944, the Commercial Finance Association is the trade group of the asset-based financial services industry, with nearly 300 member organisations throughout the US, Canada and around the world. Members include the asset-based lending arms of domestic and foreign commercial banks, small and large independent finance companies, floor plan financing organisations, factoring organisations and financing subsidiaries of major industrial corporations.

© Business Money Ltd 2009