In this feature, Charlie Perer sits with commercial finance industry participants to discuss the state of the asset-based lending industry and general market dynamics. This series features insights from a diverse group of leaders across the lending spectrum, turnaround advisory, and capital raising, highlighting their perspectives and how they are strategically positioning their businesses.

Here to tell the story are:

• Tim Derry, Upper Midwest Executive, PNC Business Credit
• Elijah Kaplan, Managing Director, Capital, Gordon Brothers
• Doug Clarida, Managing Director, Configure Partners
• Kyle Sturgeon, Managing Partner, MERU

Charlie Perer: Please briefly introduce yourselves.

Tim Derry: Thank you, Charlie, appreciate you having me. I’ve been with PNC Business Credit for approaching 14 years. Prior to PNC, I was in different roles within leverage finance, private credit and investment banking – all in the Chicago market. Upon joining PNC, I focused on private equity originations throughout the upper Midwest region. Since 2022, I have been our senior executive for the upper Midwest region, overseeing our new business and portfolio teams which generate ABL, unitranche and private credit loans. 

Elijah Kaplan: Thanks for including me, Charlie. I joined Gordon Brothers in 2024 to accelerate the firm’s lending initiatives by providing holistic liquidity solutions to lenders and borrowers, including revolvers, term loans, split-lien stretch financing, bridge financing and in-transit financing. I’ve spent the majority of my career in private credit and restructuring, mainly focusing on originating and investing in private middle-market companies’ debt.

Doug Clarida: Thank you Charlie. I am a Managing Director with Configure Partners in Atlanta, GA. Configure Partners is a credit-oriented investment bank that provides a broad range of services for our clients who want access to debt capital markets. The firm specializes in debt placement, special situations, and M&A advisory, partnering with private equity sponsors to support acquisition finance, refinancing, and dividend recapitalization transactions (ranging from $25MM - $600MM). Prior to Configure, I was a lender for over 25 years at various middle-market credit platforms.

Kyle Sturgeon: I’m a Managing Partner and Co-founder of MERU, a middle-market advisory firm. Our focus is hands-on performance improvement, turnaround and restructuring work. We often take interim roles such as Chief Restructuring Officer, Chief Transformation Officer or CFO to help our clients improve their performance and navigate complex situations. Before founding MERU, I was an early member of McKinsey’s turnaround practice and also worked at Alvarez & Marsal.

Perer: How would you describe the current market environment through the lens of your own business?

Derry: Specific. I think you can find yourself either at risk or behind if you try to manage your business with a single broad-brush stroke of “things are great” or “we have to tighten up.” There is too much variability within specific industries, end markets, and capital structures from one deal to the next to paint the current financing landscape as only moving in one direction. The first half of 2025 saw solid portfolio performance and slow new business. In the second half, we are busier than we have been in years on new business, yet cracks are showing up within the portfolio. You need to be focused on the specifics at hand for each deal. Managing to generalities will create issues. 

Clarida:We’ve stayed busy despite slow M&A activity across the market. Refinancings and recapitalizations continue to outpace LBO capital raises two to one, a trend we’ve observed for several quarters and don’t anticipate a reversal in the near term. Tariff implications had a significant impact on Q2 activity. We did begin to see a rebound in May and June, but the broader trend is that we have yet to see the M&A rebound materialize. Potential rate cuts in the second half of 2025 may help unlock some of the pent-up M&A deal flow, but lenders will also want more clarity on the impact of tariffs.

Kaplan: As a non-bank asset-based lender, we are seeing a number of situations where banks held onto credits a bit too long, which has limited their exit options. This results in fewer attractive deals for the broader alternative lender universe and creates opportunity for a unique set of alternative lenders that are both open to refinancing these companies and can serve as a strategic partner to the borrower by enhancing liquidity through other value-added services. We are seeing opportunities to club together on larger deals as like-minded lenders value our expertise and broader capabilities in the capital structure.

Sturgeon: Our turnaround business continues to be busy as a combination of elevated interest rates, legacy acquisitions made in a frothier deal market, and sometimes weak consumer spending have led to distress in several different segments. “Liberation Day” also didn’t help matters by introducing more uncertainty, which creates a cloudier picture for investment committees. By the numbers, healthcare and life sciences have been our most active source of opportunities, followed by retail and consumer, automotive, aerospace and advanced manufacturing.

Perer: Can you compare and contrast the Q1 2025 credit environment to where we are starting Q4? 

Sturgeon: We are seeing increased caution by sponsors before committing their own capital into portfolio companies. Credit remains available, but we are seeing lenders demanding increased equity support.

Kaplan: The credit environment from our perspective is a bit more challenging than where it was at the beginning of the year. As noted earlier, banks seem to be holding on to borrowers for too long. As a result, asset values, and therefore liquidity, are negatively impacted. By the time the borrowers canvass the non-bank market they often require additional capital or a more comprehensive restructuring plan. That being said, in an effort to retain customers, I think we will see banks trying to be a bit more proactive in helping borrowers find constructive liquidity solutions leading into next year. We are actively speaking with banks about liquidity-enhancing solutions that we bring to the table alongside our capital, including cost savings around lease portfolios, guidance on managing working capital more efficiently, and selective monetization of assets.

Clarida: The tariff uncertainty has shifted the expected rebound in buyout and acquisition activity to Q4 2025, or beyond. We are continuing to see a borrower-friendly private credit environment as lenders must compete to win deals in a period where the borrower supply of loans remains limited. As a result, lenders are shifting focus toward refinancings and other mandates that continue to transact, even as M&A activity remains muted.

Derry: Our activity level at the end of Q3 and heading into Q4 is drastically different than Q1. During Q1, I was concerned our new business would be lower than 2024. Now we are looking to eclipse 2024 completed deals by the end of October and adding to that total with a strong Q4. While that is on the “activity scale,” it isn’t meant to imply the credit quality of the deals booked has gotten substantially better or worse. It is still mixed and deal specific for PNC’s multiple different lending products.

Perer: Are we entering a new normal with higher advance rates being requested for ABL lenders to meet tight opening liquidity requirements?

Kaplan: Absolutely. I think we are seeing the tight opening liquidity requirements as a function of banks holding on to assets. In many instances the higher advance rates are a “need to have,” but in some it is a “nice to have.” As a result, I believe higher advance rates are driven as much by competitive pressures within the FINCO market as they are by the tight opening liquidity requirements. It seems that 90% advance rates on working capital are now the starting point for companies that are transitioning from the bank market to the non-bank market, and they often go up from there. 

Derry: I do not feel that way. There are deals that will warrant a higher advance rate and we may oblige in order to win strong credits. There are others that 1) don’t warrant the risk and/or, 2) the incremental 5.00% advance is not meaningful to the solve for the situation. Simply doing more “just because” doesn’t protect our institution and then minimizes the value it can provide when truly needed. Doing a FILO to solve a borrower’s true need is much more valuable than doing an incremental 5.00% advance to increase opening availability from $40.0MM to $41.5MM for no particular reason. A borrower looking to differentiate banks by the latter is likely not analyzing the right dynamics of picking a lender trying to add value. 

Clarida: Not sure it’s the “new normal,” but this may be the case for the near future. Borrowers continue to push for maximum liquidity to manage current macroeconomic uncertainty and private credit/non-bank ABL lenders continue to go deeper into the collateral to differentiate themselves from bank ABL lenders.

Sturgeon: We have seen this trend with some of our clients benefiting from higher advance rates when they go to refinance, especially from nonbank ABL lenders, who also tend to have lighter covenants. We believe as long as collateral values hold up in liquidations, this will continue.

Perer: Has referral source consolidation of debt advisory groups affected conversion ratios?

Clarida: Debt advisory firms are more prevalent in the ABL and cash flow markets than they were five to 10 years ago. The universe of private credit lending options has grown significantly over the last decade, and sourcing capital can be time-consuming. Debt advisory firms have created a more efficient lending market for borrowers while also allowing owners and management to allocate resources to other value-creating initiatives.

Sturgeon: Yes, consolidation has reshaped conversion in our experience. With fewer independent advisors and banks distributing deals, flow is more concentrated, so average conversion is lower, or at least more barbelled. If you are on the short list, hit rates rise; if you are outside the funnel, you get fewer at-bats and have to win on relationship, speed/certainty, and product fit – not just price.

Kaplan: I believe the debt advisory groups have actually helped conversion ratios in the aggregate. I can think of multiple deals that may have fallen apart if not for a dedicated debt advisory group that knows the market driving the execution. The increased competition due to the proliferation of finance companies has negatively impacted conversion at the individual lender level.

Derry: Not for us as I feel consolidation within the debt advisory landscape has been on the smaller end of the market. We still see consistent deal flow out of the four or five largest players within debt advisory. That has not changed. In terms of conversion ratios, I try to look at these on both a general market basis as well as specific deals where I feel strongly that PNC Business Credit should win given the structural needs or situation. We all hope to get our fair share of “market deals” but when you start losing deals your institution and the debt advisory firm felt lined up well, that is when it is time to be concerned about what changed and why. 

Perer: A year from now what will be the most likely market miss that in hindsight will be obvious?

Kaplan: I think a willingness to strategically partner in club deals will be crucial to deploying capital in the FINCO market over the next year or two. The number of participants in the FINCO market continues to increase, and therefore available capital is growing faster than the number of deals. With deals getting larger and more complex, lenders will benefit from strategic clubbing in a few ways: gaining access to industry or asset knowledge, diversification and participating in larger deals. Lenders unwilling to partner with others will have a tougher time deploying capital and may see their portfolios grow at a slower rate or shrink.

Derry: The stretched U.S. consumer is too easy of an answer. And perhaps we have all seen it already, so it shouldn’t qualify as a future miss. I’ll go with the global political environment. The sustained and recent turmoil, both domestically and globally, seems to have been completely isolated from the financing markets and global economic financial performance. Absent direct effects of tariffs at home and on the global supply base, the numerous other global conflicts have not seemed to derail global economies to any large degree. While I hope it never occurs, a true tipping point of just one of those conflicts could cause meaningful disruption. 

Sturgeon: Skepticism on all the capex going into AI (not just the hyperscalers but also data centers and related services) will be heightened as investors will increasingly look to see this investment translate to tangible P&L benefits. Companies that cannot demonstrate ROI will be punished accordingly by the markets. And some deals will likely look silly with twelve months of hindsight.

Clarida: That’s a tough one. Probably getting too aggressive with advance rates on certain types of collateral and/or underestimating bankruptcy costs.

Perer: Do you anticipate more new deal activity from the sponsor universe or bank transitions/exits? 

Sturgeon: We are hearing from our relationships on the investment banking and sponsor sides that there are a tremendous number of potential deals in the pipeline that could be unleashed if market sentiment improves and interest rates drop. This trend, combined with the fact that many PE portfolio companies have been held much longer than their typical hold periods, should lead to increased deal activity for refinancing, M&A financing and recapitalizations. We think this is likely to play out over the next few quarters.

Clarida: We are seeing deal activity from both sponsors and banks. Banks are becoming more aggressive in dealing with work out loans/special assets and sponsors are utilizing ABL financing to help reduce the overall cost of capital. Sponsor M&A is currently being driven primarily by carve-outs and add-ons as sponsor-to-sponsor trades continue to represent a diminished share of LBO activity, and as sponsors elect to extend hold positions to preserve valuations.

Derry: The sponsor universe. We have seen an unfreezing of sponsor portfolio company holds year to date 2025. Companies waiting to exit for better markets, lower rates or increased performance are now simply going to market either way to effectuate the exit and return capital to LPs, thereby creating a new transaction for others within the equity and debt markets. We have had a number of exits via successful sale transactions year to date and still have a number of others in the later stages of a healthy sale process. 

Kaplan: In many cases these are intertwined, and it is more a function of who is driving the move to a non-bank asset-based lender. In cases where the borrower is preparing for an incremental liquidity need in the near-to-medium term, it may be driven by the borrower or sponsor. Private equity sponsors have really benefited from our flexible loan structures combined with our advisory services, and we continue to see more opportunities from sponsors in advance of a dire liquidity crunch. In situations when the borrower is already maxed out from a liquidity perspective or in need of immediate liquidity, the banks are more likely to drive the exit. Given our broad financing capabilities and other liquidity enhancing solutions, we focus on both channels.

Perer: Are we at the start of a new lender formation cycle given the new recent entrants?

Derry: When did the last one end? I’m no longer surprised when someone mentions a new lender that I haven’t heard of, yet our team should be talking to. It is simply too common an occurrence these days to be surprised. For banks, it’s best to embrace it as a given and then structure our team’s effort around understanding the new entrants (who they are, how they are funded, types of deals) and which ones to spend time getting to know and trying to partner with.  

Clarida: It’s the continuation of a cycle that started years ago. There continues to be a lot of interest from institutional investors who want direct exposure to the senior credit market. We’ll likely continue to see new entrants as non-bank lenders gain market share by offering creative structures to meet borrower needs amidst tightening bank regulations.

Sturgeon: Borrowers are increasingly looking for creativity and flexibility from their lenders, and there is tremendous competition for sponsor business of all sorts on the credit side. We also think there will be increasing pressure for creative financing to help unlock “stuck” assets that can’t remain in sponsor funds forever. This combination of trends is likely to continue to spur lender formation trying to meet those market needs.

Kaplan: It seems that way. Several FINCOs have launched in the last two years, and private credit managers are leaning into asset-based lending (ABL).

Perer: Should ABL be included as part of private credit conversation? 

Derry: Asked and answered! In all seriousness, I think it is a resounding yes. Significant institutional capital has been raised to deploy into the ABL space – term loan only, unitranche, securitizations, all of it. Many debt advisors will even speak to their ABL deals “likely going Finco” and may not even include many of the down-the-middle large ABL banks in their process. The interesting thing for banks is to focus on working with those firms. Partnering to keep a borrower longer, using them to refinance out of a potential problem, or looking at their portfolio as a source of deal flow as performance turns around. Viewing Finco ABL firms only as a threat is an overly simplistic way to think about them.

Clarida: I think so. Banks continue to represent the majority of ABL activity. Still, private credit/non-bank ABL lenders are gaining share as some banks seem to be prioritizing fee-based, capital-light services that require less regulatory capital. Private credit managers continue to diversify into new areas, including the ABL market.

Sturgeon: We all have seen a growing set of non-bank lenders offering stretch ABL, FILO tranches, and hybrid ABL/cash-flow structures with bespoke covenants, faster underwriting, and higher advance rates; they compete on flexibility and certainty of execution, not just price. In those cases, ABL absolutely belongs in the private-credit conversation because the capital, structuring mindset, and risk tolerance look like private credit, even if the collateral framework is asset-based. The other part of this is higher certainty of execution as well as quicker timing due to smaller syndicate sizes, lighter field exams and more decisive underwriting processes.

Earlier this year, one of our clients completed a refinancing where a non-bank ABL provider’s ability to combine higher advances with covenant flexibility was decisive. So, my view: bank ABL (plain-vanilla, low-cost revolvers) is a different animal; non-bank ABL with stretch or hybrid features is firmly under the private-credit umbrella and should be considered alongside unitranche options.

Kaplan: I do think it should be included in the discussion. As a follow up to your previous question, one of the drivers of the lender formation cycle is the fact that a number of private credit managers are entering into the ABL strategy either by acquiring existing finance companies or launching new FINCOs. While it is a smaller market than the traditional private credit market, it provides both a nice risk/return dynamic and another offering that asset managers can deliver to their sponsor relationships.

Perer: How do lenders find blue ocean in a world of increasing competition in an increasingly efficient capital markets system?

Derry: Know where you win. Not sure that is “blue ocean,” but it increases your conversion ratio. Spend time finding transactions in the spaces and situations where you know you have higher success versus trying to find the next new ocean. Finding an entire new ocean, untouched and undiscovered, to fish in, is a lot harder than knowing where the fish bite and how to reel them in from your favorite spot in an existing ocean. 

Kaplan: Proprietary deals are few and far between these days. Identifying opportunities early, which can be done through both relationships and technology, is critical. Once an opportunity is identified, it’s important to understand the borrower’s pain points and craft a practical and credible solution that is differentiated from traditional non-bank lenders. 

Clarida: Quantitative factors are important, but qualitative factors such as responsiveness and quick execution, certainty of close, industry knowledge, ability to grow with the borrower, and being constructive if there is a bump in the road post close are just as important, if not more important, when selecting a lender.

Sturgeon: In our experience, price is only one component of a borrower’s consideration set. Other factors such as flexibility, advance rates, service levels, execution certainty, covenant levels/flexibility, and timing to close can help lenders compete on different axes to get deals done.

Perer: Have banks finally shifted to a risk-off mode that should benefit the ABL market? 

Sturgeon: We are seeing the U.S. banking market shift towards a more risk-aware posture, though not yet in full “risk-off” mode which should create tailwinds for ABL participants. Borrowers with strong, controllable collateral are more likely to secure financing when looser bank financing structures are being scrutinized. We see bank participation skewing towards the safter, higher-quality ABL credits rather than riskier and more speculative names. As banks pull back from marginal credits, nonbank lenders have been more aggressive in deploying capital and are ready to step into the void. Additionally, bank lending to private credit firms has surged recently indicating that banks are shifting some of their lending activity through private markets.

Clarida: It depends on the bank and the deal. A lot of banks are selective about deploying capital due to regulatory requirements and a focus on fee-based services. They are tying their ABL product to other fee-related business, including treasury management and capital market services (high yield notes and broadly syndicated term loans).

Derry: I haven’t seen it. We simply have not seen broken cash flow deals being pushed out of our own bank or others to the degree we all act like it occurs. Perhaps they are getting amended to extend or somehow going straight from bank cash flow to Finco/Private Credit ABL, but we have not seen strong deal flow from the debt advisory groups who are looking to refinance a cash flow structure into a bank provided ABL. 

Kaplan: I can’t say that it has happened yet, but it feels like we might be heading in that direction based on what we’re seeing transition out of bank portfolios. 

Perer: Is the collective workout industry prepared for a downturn, and this includes both bank special assets and turnaround firms? 

Derry: Based on math and age, I would say no. When was the last true recession? It sure wasn’t COVID. So, if you go back to 2008/2009, as our closest example, it was 16 years ago. Are the true senior workout professionals from that time frame still going? Some are, sure, but a large majority of them have moved on or retired. So, what is left? Specifically in private credit. How many of those lenders have managed a portfolio in bad times with limited liquidity? How many were even lenders, rather than investment bankers, back then? Overall, my answer is no. There is a talent shortfall in experienced people that have experienced a true downturn, which will make the turnaround firms that much more valuable come the next true recession. 

Sturgeon: In our experience, the workout industry has been busy the past few years with the exception of large-scale bankruptcies. As more of the buyout market has moved to unitranche private credit structures, bankruptcies are not needed to effectuate change of control transactions, which improves recoveries by avoiding wasteful professional fees. We have seen some lenders staffing up their internal workout functions to prepare for (or in some cases to continue to manage) distress in their loan books.

Kaplan: I think it is. While there will be more activity, I do not expect a wave of restructurings that would overwhelm the current capacity of restructuring professionals on the advisory side of the business or “in-house” at banks or alternative lenders. 

Clarida: It depends on the severity of the downturn. You can argue that some industry segments like retail, restaurants, and construction are in a downturn or close to a downturn due to elevated interest rates, rising product and labor costs, and normalization of post-COVID demand.

Perer: Is there enough supply to meet the pent-up FINCOs demand, especially given there are more new entrants?

Clarida: Generally, I would say no, not right now. Configure surveys private credit lenders each quarter, and 80% of Survey respondents in Q2 2025 reported investor demand exceeding borrower supply, an increase from 70% in Q1 2025, underscoring persistent capital overhang and competition for deal flow.

Sturgeon: We suspect the shortfall will be in supply of good deals at attractive multiples. PE sponsors have long memories and letting go at 9x of winners that they had internally valued at 12x previously will be difficult for them to accept.

Kaplan: In my opinion, supply is limited in terms of quantity of deals relative to the pent-up demand, partially driven by the lender formation cycle we touched on earlier, but deal sizes have increased. As noted previously, FINCOs willing to strategically partner with a lender that brings more than just capital will still be able to deploy capital at a reasonable rate.

Derry: Depends on the mandate of the individual firm. If the mandate is pure ABL, on a formula restricted by their own leverage line provider, I think it is tough. You can either take risk others don’t want or price the same risk for less. Neither is a great model long term. For those who take on no, or more limited leverage, and can truly lean in to differentiate themselves through strong due diligence and a well-thought-out structure, I think yes. To me, it’s interesting to see how the ABL FINCO landscape seems to go to either end zone. Using leverage and the requirements/restrictions that come along with it; or not taking leverage and having the ability to do a very wide range of deals. It would be interesting to see if someone can figure out a way to be in the middle and do both. 

Perer: How are you navigating the tumultuous and uncertain tariff environment with both prospects and customers? 

Clarida: The biggest driver of slow M&A has been the evolving tariff landscape. Lenders are responding in different ways. Most are evaluating borrower profiles on a case-by-case basis (conducting diligence on each opportunity at a supplier-by-supplier, SKU-by-SKU, and competitor-by-competitor level). Still, there are a handful of lenders who are either completely risk-on or risk-off. We don’t know the full impact yet, but we do know which sectors are most exposed. Automotive, consumer and retail, and manufacturing are getting hit the hardest due to their reliance on global supply chains. Meanwhile, the service, tech and healthcare sectors are more directly insulated from tariffs and are attractive due to subscription-based revenue models and strong growth prospects.

Derry: Deal by deal. We do not have a broad-brush answer to tariffs and the effect on our customers. It depends on supply chains, customer contracts, the borrower’s market strength/position, seasonality, inventory turns, and other factors. The only true red flag we stumble upon is an existing or potential borrower that has no plan or understanding. That becomes concerning quickly. 

Sturgeon: Many of our clients have felt significant impacts from tariffs, including a manufacturer that used Canadian steel and a producer that supplied US customers from their European factory. We help clients stabilize operations and cash flows, solidify their supply chains, revisit their S&OP processes and identify efficiencies in operations, all of which have been in demand. As time passes, more of our clients and their sponsors are accepting that higher tariffs everywhere (including outside the US) is likely to be the “new normal” and are planning accordingly.

Kaplan: We are doing extensive diligence on how new prospects are managing and impacted by tariffs. As it relates to borrowers in the portfolio, we are actively tracking the impact that tariffs have and speaking with management teams regularly. Additionally, we are leveraging our various advisory services around inventory management, real estate and trading to provide more frequent and detailed visibility into company performance and also help management teams navigate the tariff environment and manage costs more effectively. 

Perer: What are the primary market drivers your team focuses on the most?

Derry: My cheater answer is “enterprise value.”  because 1) it encompasses a whole lot of tangibles and intangibles that turn information into a credit story, and 2) many of our pure bank ABL counterparts seem to overlook it and focus only on ABL principles within a liquidation. There is such a thing as a “collateral loan,” and we do them, but my personal preference and the track record of our group overall has shown an ability to value not just the ABL collateral, but the market drives and company-specific factors that lead to a strong enterprise value which suggest we will in fact never have to discuss a liquidation.  

Clarida: There are several macro and micro market drivers we track. Still, a few of them include: i) leverage loan maturities: the share of near-term maturities has fallen meaningfully, with the 2025-2026 maturity wall now representing a small fraction of outstanding institutional loans. Sponsor-to-sponsor trades continue to represent a diminished share of LBO activity due to bid-ask spread gaps, as private equity firms elect to extend hold periods to preserve valuations; ii) private credit supply and demand dynamics: as noted previously, we survey private credit lenders each quarter regarding investor demand vs. borrower supply.  Investor demand has outpaced supply over the last few quarters: iii) Configure pipeline volume by use of proceeds: refinancing and recapitalization activity remained the primary use of proceeds in Q2 2025 (66% vs. 57% in Q1 2025)

Sturgeon: We look at a few things. Consumer spending and interest rates tend to underpin a lot of the economics of our clients’ businesses. Inflation is a big driver. Credit availability and PE deal activity are big drivers.

Kaplan: We track overall industry performance and real-time asset values unique to specific industries. This allows us to identify and get ahead of trends that may be predictive of bank to non-bank transitions, or PE portfolio companies in need of liquidity. We also track professional engagements of law firms, turnaround firms and investment banks and are regularly speaking with market participants.

Perer: How busy is the turnaround consulting industry given it’s a leading indicator of future ABL deal flow? 

Clarida: Kyle at MERU can best answer this one, but anecdotally, the turnaround professionals we interact with have been busy. It’s not surprising, as we have noticed an uptick in amendment activity for private credit portfolio companies and requests for independent directors from lenders who are seeking board representation. 

Sturgeon: Our turnaround practice has been continually busy for the past three years since the advent of inflation and increased interest rates. From what we can tell, there are still many deals that remain in sponsor portfolios that need to be worked out. We believe that sponsors that ignore the noise and focus on value creation will be the ones who see the best returns, and that matches what we see from several of them that have involved their operating partners in fundraising.

Kaplan: Based on market conversations, I’m hearing that many turnaround firms are fairly busy as we continue to see new opportunities from them but would like to be busier and are constantly trying to identify new opportunities.

Derry: Thankfully, I am the wrong person to ask. Knocking on wood, but my team’s portfolio is as clean as it has been in several years. Granted we got there with the help of some great turnaround and restructuring partners. But with not one consultant currently engaged, I can’t speak to that industry’s capacity at the moment. Selfishly, from a new deal perspective, it would be great to hear they are busy with the corporate bank cash flow to ABL refinances. 

Perer: What is a perception you have about today’s ABL market that is not widely shared? 

Kaplan: I think we will see more strategic clubbing of non-bank ABL deals than we have in the past as deal sizes increase and more capital flows into the space and we will start to see patterns of specific firms partnering together to win deals.

Derry: That it is not commoditized; many seem to think it is. It can be if you only compare the term sheets on strong borrower “market” deals. But it isn’t if you get into the details of the groups themselves or their deals in distress. Ask groups about their bad deals; where did they support them, did they provide the borrower time, did they force a refinance at the first default, or will they do an “air ball” if warranted. On a strong new deal, ask them to negotiate payment conditions for dividends and voluntary term loan payments. You will find out a lot about groups in the market when you look past their “market” term sheets and get into their portfolios or topics that test them. Money can be a commodity. The people who provide it to you, and how they act when things hit a bump, are not. That is important to remember and seems to be easily forgotten. 

Clarida: We’ll likely see more cross-border ABL transactions as international companies continue to diversify their global supply chains. We have seen increased interest in multinational working capital credit facilities from sponsors with global manufacturing and distribution companies. This should only accelerate once there is more certainty regarding tariffs.

Sturgeon: The best ABL lenders’ edge won’t come from being a little tighter on inventory or a little looser on AR – it will come from underwriting the borrower’s data processes. The best lenders will reserve against process risk (how deductions are created, validated, and cleared) rather than argue about another 2% to3% on advance. They’ll covenant to data-quality KPIs, not just borrowing base metrics; ingest remittance detail weekly, not review agings monthly; and model platform setoff and returns accurately. In short, the next losses won’t be because the forklifts weren’t worth it, they’ll be because the borrower’s systems quietly turned 98% eligible AR into 92% collectible cash. Underwrite the plumbing, not just the pool.