Commercial Finance Association Education Foundation Announces First-of-Its-Kind Study Dimensioning $4 Trillion U.S. Secured Commercial Finance Market

NEW YORK, Mar. 7, 2019 /PRNewswire-PRWeb/ -- The Commercial Finance Association Education Foundation, soon to be the Secured Finance Foundation, today announced the findings of a comprehensive study of the scope and impact of the secured commercial finance market in the U.S. The 2019 Secured Finance Market Sizing & Impact Study, conducted with the assistance of Ernst & Young LLP (EY), was based on surveys of industry participants, in-depth interviews with subject matter specialists and data from a broad range of sources that track the loan markets.

"The results of this landmark study dimension for the first time the breadth, vitality and interconnectedness of the $4 trillion network of secured finance providers who deploy the capital that fuels our nation's economy," said Richard D. Gumbrecht, CEO of the Commercial Finance Association (soon to become the Secured Finance Network). "This study substantiates a number of never-before-available insights such as the size and characteristics of the market for non-syndicated asset-based lending which offers a lifeline to many small and medium-sized businesses and their employees."

Report highlights:

    --  The secured commercial finance market in the U.S. is comprised of
        several large and distinct, but interrelated, product segments including
        asset-based lending (ABL), factoring, supply chain finance, equipment
        finance and leasing, leveraged and cash-flow loans, and asset-backed
        securities. Collectively, providers of secured financing employ over
        60,000 people and deploy capital to over 1 million U.S. businesses.
    --  The volume of U.S. secured financing for commercial entities was over $4
        trillion in 2018, affecting either directly or indirectly about
        one-fifth of U.S. GDP.

Sector specific findings:

    --  Asset-Based Lending. The study estimates $465 billion of ABL financing
        commitments in the U.S. as of year-end 2018, a 6 percent increase over
        2017, with growth of 6-7 percent estimated for 2019. Losses on ABL loans
        have been less than five basis points in each of the past three years.
        The pace of non-syndicated loan growth has more than doubled that of
        overall commercial and industrial lending during the last four years.
        After several years of robust market conditions, survey participants
        have begun to express concerns about covenant-lite structures and
        diminishing credit protections--characterizing today's conditions as "a
        borrower-driven market."
    --  Factoring. The volume of receivables purchased in factoring arrangements
        by some 900 U.S. factors was about $101 billion in 2018 and could grow
        in the low single-digit range in 2019, driven by strength in micro,
        small, and medium enterprises and expansion into nontraditional industry
        segments.
    --  Supply Chain Finance. Encompassing purchase order finance, supplier
        finance and inventory finance, the total U.S. supply chain finance
        market was estimated to be $416 billion in 2018, a 9 percent increase
        over the prior year. Supply chain finance helps support U.S. imports and
        exports and its presence represents an amount equal to 12 percent of
        total U.S. trade receivables in 2018.
    --  Equipment Finance and Leasing. U.S. private enterprises and public
        institutions acquired about $1.76 trillion in equipment and software in
        2018, representing 8.5 percent of U.S. GDP. Nearly 60 percent of that
        purchase volume, or about $1.04 trillion, was financed by either lease,
        loan or line of credit financing. Growth in software purchases outpaced
        equipment by 200 basis points, underscoring the importance of this
        component of the equipment finance landscape.
    --  Leveraged Lending. The Study approximates the total principal
        outstanding of leveraged loans at year-end 2018 to be about $4.3
        trillion. Approximately $726 billion of institutional loan volume was
        issued in 2018, down from $919 billion in 2017 indicating a cyclical
        turn. On a combined pro rata and institutional basis, leveraged lending
        was off by 11.6 percent in 2018, but both 2017 and 2018 were materially
        higher than all prior years. The volume of loans trading in the
        leveraged loan secondary market grew to over $1.1 trillion in 2018.
    --  Cash Flow Lending. 2018 was a record year for issuance of
        investment-grade cash flow loans, rising 26 percent above 2017, reaching
        $1.035 trillion.
    --  Asset-backed Securitization. Total outstanding commercial
        finance-related ABS has grown at a 9.3 percent CAGR since 2010. At $305
        billion as of the end of 2018, these securities represent 40 percent of
        outstanding ABS, not including collateralized loan obligations (CLOs).

Additional observations:

    --  Combined, the secured finance types covered in the Study provide
        financings to companies throughout their lifecycle, ranging from
        recourse factoring agreements for early-stage companies, ABL, leveraged
        loans and cash flow loans to higher performing companies. And other
        tightly monitored forms of secured loans for companies in need of a
        turnaround.
    --  Based on survey participants, the industry continues to experience
        strong growth fueled by economic expansion, abundant liquidity and a
        moderately rising interest rate environment, but faces headwinds from
        trade policy uncertainty, aggressive deal terms and growing talent
        shortages.
    --  Non-traditional market players are adding to overall market size by
        serving underrepresented segments, particularly in the small and middle
        market while innovations are driving some blurring of financing product
        distinctions, likely resulting in more bundled and hybrid solutions over
        time.

"This study will have a long-term impact as it will spawn more granular research at the industry, product and geographic level over the coming months and years," added Gumbrecht.

About the Commercial Finance Association
Founded in 1944, the Commercial Finance Association, soon to become the Secured Finance Network, is the international trade organization representing the asset-based lending, factoring, trade and supply chain finance industries, with over 1,000 member organizations throughout the U.S., Canada and around the world. CFA provides education, networking opportunities and industry advocacy to the global secured finance community. For more information please visit cfa.com.

About the CFA Education Foundation
Founded in 1990 the CFA Education Foundation, soon to become the Secured Finance Foundation, exists to cultivate education, innovation and charitable works for the betterment of the secured finance community. As a separate entity from the Commercial Finance Association, the CFA Education Foundation is a 501(c)(3) organization that funds crucial initiatives benefiting secured lenders worldwide. For more information or to make a donation, please visit cfa.com.

SOURCE Commercial Finance Association