There is a simmering concern among [non-C suite/rank-in-file] lending professionals about the increasing use of non-competes to limit the lateral and upward movement of talent. Across the industry - from the large, institutional credit platforms down to the boutique non-bank lenders—there’s been a growing obsession with non-compete agreements and protection of “trade secrets.” Not just for executives, but for mid-level originators, portfolio managers, analysts, and even the office barista who once made a term sheet-shaped latte art. It’s completely appropriate to get a non-compete in purchasing one’s ownership, but it’s a different story to ask regular employees who rely on job mobility. In a business built on relationships, judgment, and integrity, the new defensive playbook is increasingly legal, not cultural. The message from some leadership teams seems to be: “We can’t inspire you to stay - but we can make sure you can’t leave.”

The Great Fear

The ABL market is competitive, fragmented, and driven by people who know borrowers, brokers, and banks on a first-name basis. In a world where capital is increasingly commoditized, relationships are the only moat left. And in response to that reality, many firms have decided the best way to protect their moat is to build a legal wall around it. Hence, the rise of the all-encompassing non-compete: a legal instrument that often says more about a firm’s insecurity than its strength. Big platforms and small independents alike have quietly adopted these clauses, blanketing their staff with restrictions that would make Silicon Valley blush. The logic, they say, is simple - we’ve invested in training, deal flow, and brand recognition. If people can just leave, how can we grow?

But here’s the problem: culture is not intellectual property, and talent is not a trade secret. Is there anything really proprietary about the Starbucks experience that stops anyone from copying it? The answer is no, but what is proprietary is the culture started by Howard Schultz. It’s the culture that drives the customer experience. A non-compete will have the opposite effect on culture.

A Misguided Fix for a Cultural Problem

Non-competes are often sold internally as “retention tools.” A firm with a great culture doesn’t need non-competes to retain good people; a firm that needs non-competes probably doesn’t have a great culture to begin with. Culture, after all, is the one thing you can’t fake or litigate. It’s built over time through trust, transparency, and leadership that genuinely values its people - not just their production. If an employee’s loyalty has to be enforced by contract, that’s not loyalty - it’s captivity. And captivity breeds resentment, not retention.

Many in ABL like to say they “lend against the liquidation value of collateral.” Increasingly, it seems some firms are trying to apply the same concept to their own staff - what’s your liquidation value if you leave? That’s not a culture; that’s an auction.

When Everyone’s Replaceable, No One Cares

There’s a quiet irony in all this. The very firms that enforce non-competes with the greatest zeal often talk the loudest about being “people-first.” They host company retreats, distribute branded Yeti mugs, and publish mission statements about empowerment. But when someone decides to pursue another opportunity, the tone shifts from kumbaya to cease-and-desist. In the ABL ecosystem, reputation matters. Clients notice when firms sue their ex-employees, and competitors certainly do. The best people always have options, and they remember which firms treated departing colleagues with respect - and which ones didn’t.

Culture isn’t about keeping people from leaving; it’s about making them not want to. The best managers understand that employees who feel respected, challenged, and valued don’t need a legal leash to stay. They’ll stay because they want to.

The Industry Double Standard

Here’s the kicker: the same executives who lock their teams into restrictive contracts often have none themselves. The rationale? “We’re different - we own equity.” But the message that they send to employees is devastating – freedom is reserved for the top, control for the rest.

And yet, in a market that thrives on personal connections and entrepreneurial drive, it’s the junior and mid-level folks who often fuel growth. They’re the ones making the calls, managing the deals, nurturing relationships. Stifling their ability to evolve professionally isn’t just bad ethics - it’s bad economics.

Let’s be honest: most ABL employees aren’t leaving to start a competing firm; they’re leaving because they feel undervalued, overworked, or micromanaged. Non-competes won’t fix that - they’ll just make it harder for good people to rejoin the industry later.

Culture as the Real Retention Strategy

The recipe for retention isn’t complicated: communicate openly, recognize contributions, and create real pathways for advancement. If your people believe they have a future where they are, they won’t need to look elsewhere. The irony is that enforcing non-competes can destroy exactly what firms are trying to preserve: loyalty. Employees who feel trapped rarely give their best effort. Worse, they’ll quietly disengage long before their contract expires.

ABL firms like to think in terms of collateral, control, and covenants. But when it comes to talent, the best covenant is cultural. Treat people fairly. Pay them competitively. Give them autonomy and respect. The payoff is measured not in lawsuits avoided, but in employees who become lifelong ambassadors.

The Endgame

As the industry matures and consolidates, the real differentiator won’t be who has the cheapest capital or the largest fund—it’ll be who can attract and retain the best people. The firms that rely on non-competes are signaling, perhaps unintentionally, that they don’t trust their culture to do that work for them.

And in an industry built on trust, that’s a losing bet. So, here’s a modest proposal for every ABL leader drafting their next employment agreement: instead of adding another page of legal fine print, try adding another ounce of genuine culture. It’s a far better investment - and the returns compound daily. Because at the end of the day, you can’t sue your way to loyalty.