Why asset-based finance is the future of private credit Why asset-based finance is the future of private credit

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Flexible and resilient:

Why asset-based finance is the future of private credit

The Reuters news staff had no role in the production of this content. It was created by Reuters Plus, the brand marketing studio of Reuters.

Produced by Reuters Plus for

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Nothing within the booming world of private credit is growing quite as rapidly as asset-based finance (ABF).

From real estate to investment-grade fine wines, assets are being deployed to generate cash flow, as ABF proves to be a more secure and flexible credit option than traditional direct loans. ABF is not only flowing from heavy assets, such as industrial machinery and shipping containers. This vast asset-class extends to income-producing contracts from corporate loans, subprime auto loans, credit card receivables, music royalties and intellectual property income. By pooling such a broad range of assets, ABF offers massive portfolio diversification and scale. Collateral protection from tangible values and contractual cash flows across diverse sectors reduces exposure to economic cycles, ensuring stability and predictability that direct lending cannot match. ABF facilities are bespoke to a company’s business needs. They can be customized dynamically to finance growth and meet new macroeconomic realities.

Asset-based finance has become the critical fulcrum within the private credit landscape because it offers a clear path to resiliency and security.

Eric Shea, Head of the Structured Products Group (SPG) at Capital One

Eric Shea, Head of the Structured Products Group (SPG) at Capital One

Such structural benefits are attractive to middle-market decision makers as they increasingly look to non-traditional financing for credit solutions. These strengths help to explain why the private ABF market has doubled since 2008 to be worth $6.1 trillion, according to research by KKR. The global investment firm predicted that the market will continue to grow to $9.2 trillion by 2029, meaning it would then be bigger than the markets for syndicated loans, high-yield bonds and direct-lending combined.

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A clear path to security

“Asset-based finance has become the critical fulcrum within the private credit landscape because it offers a clear path to resiliency and security,” says Eric Shea, head of the Structured Products Group (SPG), Capital One. “While much of the focus on the top-line growth of private credit, the real strength of the market lies in thoughtful financing structures, like ABF, that are backed by high-quality assets. These are the solutions that allow middle-market firms, which operate in specialized and niche asset classes, to operate efficiently and compete against larger firms.” The potential is enormous. A study of the global ABF market this year by Schroders Capital concluded: “We expect the demand for resilient income and downside protection, combined with a more crowded traditional credit market, will further accelerate allocations to ABF as a core income allocation.” Huw Van Steenis, vice chair of Oliver Wyman, a global management consultancy, says that ABF has been growing at 38% over the past two years, double the rate of other categories of private credit.

Middle-market private credit managers often have fewer partners to rely on who can deliver the tailored, asset-backed solutions their niche strategies demand.

John Robuck, Head of Capital One's Financial Institutions Group (FIG)

John Chamberlain, Managing Director and Head of Tax Credit Finance at Capital One

ABF is over-shadowing direct lending, which has led the growth in private credit over the past decade, since banks took a step back from the lending market when regulatory changes were introduced in the wake of the 2008 financial crisis, obliging them to hold more capital in reserve. Since then, uncertain macroeconomic conditions, including stubbornly high inflation and high-interest rates, have led firms to look beyond standard term loans for credit solutions. ABF has allowed companies to optimize leverage against their tangible assets, such as equipment and receivables, something that is especially attractive in a higher-rate environment where firms are more conservative with leverage multiples. Shea notes that integrated ABF and cash flow packages can lower the weighted average cost of capital by securing debt against liquid assets at a lower interest rate, with leverage adjusting according to asset performance. ABF has also grown with the emergence of new technologies that allow smaller platforms to start lending without the need for the vast operations that traditional banks once relied on.

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Yet while the largest private credit firms have hundreds of billions of dollars in assets under management and access to finance from global money-center banks, niche lenders are not so well-supported by partners that can offer them the financing structures that they need to operate efficiently and compete. “Middle-market private credit managers often have fewer partners to rely on who can deliver the tailored, asset-backed solutions their niche strategies demand,” says John Robuck, head of Capital One’s Financial Institutions Group (FIG). “We provide reliable capital, specialized expertise, and strategic support to help these managers grow and adapt by leveraging the scale and flexibility of asset-backed finance.”

An underserved market

unsecured consumer loan ABSfor Reach Financial | REACH 2026-1

subprime auto loan ABS forConsumer Portfolio Services | CPS 2026-B

residual financing deal forConsumer Portfolio Services | CPS 2026-1

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Capital One’s FIG and SPG draw on a deep well of lending and capital markets experience across the ABF spectrum. Their underwriting expertise underpins structured lending facilities, secured by pools of underlying loans. Deep industry knowledge informs the structuring and distributing of asset-based securities (ABS) and collateralized loan obligations (CLO) to institutional investors. SPG provides a range of structured products such as bespoke capital raising solutions. In the commercial asset class, these include equipment finance, small business administration (SBA) loans, MM CLO, CRE CLO, and triple net leases. Consumer asset classes include auto finance, unsecured consumer loans, home improvement loans, timeshare and tax liens.

Already in 2026, Capital One has participated in 27 ABS/CLO transactions. In the process, it has underwritten approximately $16.5 billion across a broad range of asset classes, including subprime auto ABS, unsecured consumer ABS, small business ABS, triple net lease ABS, timeshare ABS and CRE CLO. A few highlighted transactions are included below where Capital One served as the left lead/structuring lead:

Partnership in practice

Building for the long term

Private credit has become an established part of the capital markets landscape, and ABF is set to be one of the most important engines in its growth. As the private credit market continues to evolve, companies that secure stable, asset-backed financing and remain flexible in how they deploy capital will be best-positioned to handle what comes next. “The firms that stay nimble and proactive, focusing on asset-backed strategies for resilience, will be able to capture meaningful opportunities,” says Shea.The structural shift underway in private credit is unlikely to reverse. As macroeconomic uncertainty persists and banks remain constrained by capital requirements implemented after 2008, the demand for financing solutions tied to tangible assets rather than cash flow projections will only deepen. ABF is no longer an alternative to mainstream credit. It is redefining the mainstream.For middle-market companies navigating that shift, the ability to access flexible, asset-backed capital at scale may prove to be a defining competitive advantage. In an environment where agility matters as much as size, the quality of a firm's financing structure is increasingly inseparable from the quality of its strategy.

See how Capital One partners across the economy to support sustainable growth and shared opportunity.

Find out more

A clear path to security

equipment lease ABS for Avtech Capital | AVT 2026-1

timeshare ABS for Westgate Resorts | WESTR 2026-1

subprime auto loan ABS for Lobel Financial | LOBEL 2026-1

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