Asset Based Lending in the mid-market

ABN AMRO Commercial Finance has seen a surge of deal activity in recent months. What external and internal factors contributed to that? 

Q3 was record breaking for us in terms of new deals completed. A mid-market lender recently exited the market – this created an opportunity for us to take on some of their clients. That was a key benefit for us in the mid-market along with a few other new deals. 

More widely there have been some elements of activity. We've seen existing clients buy more businesses so therefore they are looking to add those receivables to their existing facility. However, the general view of the marketplace is that a number of potential prospects are still benefiting from governmental support as a result of  Covid-19, such as the Recovery Loan Scheme. Internally, we have been constantly evolving and adapting over the course of the pandemic to ensure our teams have been equipped to continue to support our clients with reliable asset based funding solutions.  

Which sectors were busiest in Q3? 

Historically, invoice finance has been used a lot in the mid-market by recruitment companies. We saw continued growth in that sector, with an element of consolidation as well. We've also seen deals in food services. There are certain sectors that do not work for asset based lending but generally we've seen growth across the board. 

What trends do you expect to see in Q4 and the early part of 2022? 

As we go into the new year, people will be thinking about what is next for their business. There will naturally be a number of people who decide it needs to move to the next generation or they need to sell. As a result, I think over the coming months we will see more M&A activity as things start to normalise. This has been the case in the corporate market – and we expect that to follow in the mid-market. There remains a lot of money from private equity on the side-lines to finance M&A transactions. Certainly we also expect our clients to be utilizing more of their facility and their receivables ledgers increasing because demand is increasing. I think we will begin to see more of an uptick in the mid-market towards the end of this year, then through to next year. We've broadened our team in readiness, and are looking to add more people.  

What challenges are you conscious of in the coming months?

Things could get derailed if there was another lockdown. Last year we did our budget on the basis that there wouldn't be another lockdown and there was – but luckily companies can adapt. Another lockdown would particularly hit the hospitality industry as well as affecting business generally. People's mindset and willingness and ability to spend is crucial. What's been clear this year is that individuals in the UK want to spend.

What is ABN AMRO Commercial Finance’s aim over the coming months? 

We continue to look for direct bilateral transactions in the mid-market – including M&A and refinancings – but we’re also interested in expanding our portfolio by working with businesses seeking to exit a part of the ABL market that we think has a viable future. COP26 is a strong reminder that businesses need to play their part in the reduction of CO2 levels. ABN AMRO Bank has been at the forefront of sustainability for many years and we actively look to support businesses with a sustainable focus. We can achieve this by working with clients who are committed to sustainability through their ESG strategies and by investing in renewable or sustainable asset classes.