For growing lenders, access to scalable, flexible capital is key to unlocking expansion. Asset-backed securities (ABS) have become a go-to solution for non-bank lenders who need to maximize liquidity and minimize risk without diluting ownership. ABS structures allow lenders to leverage their existing assets, turning them into a reliable capital stream. But how exactly does ABS work in lender financing, and why is it becoming a popular option? Let’s dive into how ABS supports lender growth and see how Avon River Ventures is helping lenders scale successfully.
What Is ABS in Lender Financing?
In simplest terms, an asset-backed security is a financial instrument backed by a pool of assets, like loans or receivables. Instead of holding these assets, lenders package them into securities that can be sold to investors. For investors, ABS offers a structured and relatively secure way to earn returns. For lenders, it provides a way to recycle their funds efficiently, supporting ongoing growth without constantly seeking new equity.
Industry Snapshot
The ABS market is surging. In the U.S. alone, it reached over $290 billion in 2023 and is forecasted to continue growing by around 6.3% per year through 2028. Non-bank lenders, in particular, are increasingly tapping into ABS as an alternative to traditional credit, representing about 28% of ABS issuance last year. Many of these lenders are coming from sectors like small business lending, equipment leasing, and unsecured consumer loans, where flexibility is critical and traditional funding falls short. With such strong demand, ABS is proving to be more than just an alternative—it’s becoming an essential component of modern lender financing.
Benefits of ABS Financing
For non-bank lenders, the advantages of ABS financing are clear:
Liquidity: By selling asset-backed securities, lenders can convert assets into cash, keeping funds flowing to meet new demand. This liquidity is vital for fast-growing lenders who need constant access to capital.
Risk Reduction: ABS allows risk to be spread across a pool of assets. By pooling multiple loans or receivables, lenders protect themselves (and investors) from the impact of any single asset’s default.
Growth with Control: One of the biggest draws of ABS is the ability to raise substantial funds without diluting ownership or giving up control, making it ideal for founders focused on scaling.
Avon River Ventures: Building Tailored ABS Solutions
At Avon River Ventures, we design ABS facilities that match the unique needs of each lender we work with. Our clients include growing non-bank lenders who are looking for capital solutions that fit their business models, with loan facilities that range from $1.5 million to $3 million initially, and follow-on facilities up to $75 million. Our team understands that flexibility is essential, so we offer terms like interest-only periods and customized amortization schedules. This allows lenders to focus on their business, knowing they have a structured, reliable capital source backing them.
Case Study: ABS at Work
Consider a small business lender that approached us in 2022. They had a solid track record and a fast-growing portfolio of short-term loans to SMEs across the U.S. But, like many lenders in their position, they were facing challenges finding capital with the flexibility they needed to scale. Traditional banks weren’t able to meet their demands, as the lender needed a capital source that didn’t require them to give up equity. Working with Avon River Ventures, we structured a $5 million ABS warehouse line, secured by the lender’s existing loan receivables. This financing provided the liquidity they needed to keep funding new loans while maintaining ownership and control. Over the next 18 months, the lender doubled its loan portfolio and grew its client base by 60%.
Today, they’re recognized as one of the leading SME lenders in their region, thanks in part to the capital flexibility provided by their ABS line.
Why ABS Financing Matters for Modern Lenders
ABS isn’t just an option for today’s non-bank lenders—it’s a smart strategy for long-term growth. As more lenders embrace ABS, we’re seeing how it can bring stability, flexibility, and sustainability to fast-growing businesses.
Avon River Ventures is committed to supporting lenders through ABS facilities that offer both strategic and financial advantages. With the right ABS partner, lenders can scale rapidly, keep their operations nimble, and maintain control of their destiny. At Avon River Ventures, we’re here to help lenders navigate ABS financing with customized solutions designed to foster growth. If you’re ready to learn how ABS can fit your financing strategy, reach out to us.
Let’s talk about how Avon River Ventures can help unlock your business’s next stage of growth.