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2023

South Africa Asset-based Lending Market

South Africa Asset-based Lending Market Size, Share, Competitive Landscape and Trend Analysis Report by Type (Inventory Financing, Receivables Financing, Equipment Financing, and Others), Interest Rate (Fixed Rate and Floating Rate), and End User (Large Enterprises and Small & Medium-sized Enterprises): Country Opportunity Analysis and Industry Forecast, 2022-2031

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Author's: Sourabh Ekre| Kanhaiya Kathoke | Vineet Kumar
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The South Africa asset-based lending market was valued at $601.73 million in 2021 and is projected to reach $2,268.00 million by 2031, growing at a CAGR of 14.5% from 2022 to 2031.

A loan that is backed by an asset is referred to as asset-based lending. In other words, in asset-based lending, a borrower's asset is used as collateral for the loan that the lender has approved. In asset-based lending, the borrower's assets serve as collateral for the loan. Accounts receivable, inventory, marketable securities, and property, plant, and equipment are a few examples of assets that can be used to secure a loan.

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Asset-based lending is less risky than unsecured lending (a loan that is not secured by an asset or assets) since the loan is secured by an asset, and as a result, a lower interest rate is paid. In addition, the more liquid the asset, the less risky the loan is considered and the lower the interest rate demanded. Further, asset-based loans are easier and quicker to obtain than unsecured loans and lines of credit. Thus, these factors notably contribute towards the South Africa asset-based lending market growth. However, higher interest rates than conventional bank loans have and the risk of losing the collateral if borrower defaults on the loan is the major factor hindering the growth of the market. On the contrary, there is growing implementation of advanced technologies in South Africa asset-based lending which is expected to boost the market in the coming years. Furthermore, the growing reliance on digital banking is expected to provide lucrative opportunities for the market to grow in upcoming years.

The report focuses on growth prospects, restraints, and trends of the South Africa asset-based lending market outlook. The study provides Porter’s five forces analysis to understand the impact of various factors, such as bargaining power of suppliers, competitive intensity of competitors, threat of new entrants, threat of substitutes, and bargaining power of buyers, on the South Africa asset-based lending market forecast

South Africa Asset-based Lending Market
By Type
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Receivables Financing segment accounted for the highest market share in 2021.

Segment Review

The South Africa asset-based lending market is segmented based on type, interest rate, and end user. By type, it is categorized into inventory financing, receivables financing, equipment financing, and others. By interest rate, it is bifurcated into fixed rate and floating rate. By end user, it is divided into large enterprises and small & medium-sized enterprises.

By interest rate, the fixed rate segment attained the highest South Africa asset-based lending market share in 2021. This is attributed to the fact that a fixed rate loan's principal benefit is that it shields the borrower against unexpected and possibly large increases in monthly payments in the event that interest rates rise. Furthermore, loans with fixed rates are simple to comprehend and don't differ much from lender to lender.

South Africa Asset-based Lending Market
By Interest Rate
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Fixed Rate segment accounted for the highest market share in 2021.

Competitive Analysis

The report analyzes the profiles of key players operating in the South Africa asset-based lending market such as JPMorgan Chase And Co., Lloyds Bank, Barclays Bank PLC, Wells Fargo, White Oak Financial, LLC, First National Bank, Investec, African Bank, Citigroup Inc., and HSBC Bank plc. These players have adopted various business strategies such as product launch, partnership, and business development to increase their market penetration and strengthen their position in the South Africa asset-based lending market.   

Market Landscape and Trends

A logical progression of the services offered by a receivables financier is asset-based lending, or ABL. The ABL provider is expected to consider the client company's assets, including fixed assets like property, raw materials, stock, equipment and machinery, and other assets in addition to funding just the assets that are the most liquid, the debtors. The ABL lender is anticipated to consider the whole worth of the collection of assets and develop a financing package based on that value (and going forward).

Further, it gives the ABL community the chance to revaluate some of the conventional ways of executing ABL from the perspective of developing technologies. Process optimization is made possible by emerging technology. In general, this can improve user experience, save expenses, and increase compliance. Furthermore, all firms have the perspective that they need to use both current and emerging technology to better their operations. Therefore, these are the major market trends for South Africa asset-based lending market.

COVID-19 Impact Analysis

The pandemic had a positive impact on South Africa asset-based lending market owing the increased demand for loans due to lockdowns. Some businesses changed their revolving credit facilities from secured cash-flow-based to asset-based lines of credit as a result of the financial hardship brought on by the COVID-19 pandemic. These facilities were applicable to businesses in retail, wholesale (such as equipment-rental and food-and-beverage companies), and general distribution, where large quantities of inventory are more typical. Thus, the pandemic had a positive impact on South Africa asset-based lending industry

Top Impacting Factors

Aids in improving liquidity

The most significant advantage that asset-based finance offers to a business is increased liquidity. Borrowers can have stable finances and predictable cash flow if used properly. In addition, companies in South Africa that are expanding quickly have constrained cash flow or rely on seasonal income and can use this benefit to stabilize operations. Furthermore, asset-based lending arrangements can be the best source of funding for many firms in South Africa, especially non-investment grade corporations and organizations in transition that cannot normally be eligible for a cash flow loan. Furthermore, an attractive new product was introduced by key players in the market, which further boosts the growth of the market. For instance, in February 2023, South African fintech startup, Lulalend, has raised $35 million in a Series B round to launch new products and expand its loan book. The firm will strive to grow its offering to women-owned SMEs in the area in conjunction with Women's World Banking Asset Management. The organization thinks having bank accounts would provide businesses with access to more advantages, such as capital and cash flow management.

Easier qualification criteria for South Africa asset-based lending

A bank loan or business line of credit is more difficult to get approved than asset-based financing programs. The business needs to have a short track record of profitability and reasonable financial controls. In addition to that, the organization needs to have assets that can be borrowed against. The accounts receivable are the assets that can be leveraged most easily. As they can be quickly converted into cash, invoices from reputable commercial clients make excellent collateral. The majority of lenders favor funding invoices with a 70-day payment term. Equipment and inventory are additional collateral that the businesses may use to qualify for ABL program. Thus, the easier qualification criteria for asset-based lending is fueling the growth of the South Africa asset-based lending market size.

Access to large sums of money

Small business owners often do not have the financial capability to raise funding in the debt or equity markets. This can make starting a business extremely expensive and risky. However, with an asset-based lending, it is possible to cover all business expenses by availing loans. This makes it significantly less intimidating for business owners without extensive resources to obtain a relatively large amount of funding. In addition, by consolidating all financing on one loan, asset-based lending helps to access large sum of money for small businesses. Therefore, this is a major driving factor for the South Africa asset-based lending market.

Key benefits for stakeholders

  • This report provides a quantitative analysis of the market segments, current trends, estimations, and dynamics of the South Africa asset-based lending market analysis from 2022 to 2031 to identify the prevailing South Africa asset-based lending market opportunity.
  • The market research is offered along with information related to key drivers, restraints, and opportunities.
  • Porter's five forces analysis highlights the potency of buyers and suppliers to enable stakeholders market profit-oriented business decisions and strengthen their supplier-buyer network.
  • In-depth analysis of the South Africa asset-based lending market segmentation assists to determine the prevailing market opportunities.
  • Major countries in each region are mapped according to their revenue contribution to the market.
  • Market player positioning facilitates benchmarking and provides a clear understanding of the present position of the market players.
  • The report includes the analysis of the regional as well as South Africa asset-based lending market trends, key players, market segments, application areas, and market growth strategies.

South Africa Asset-based Lending Market Report Highlights

Aspects Details
South Africa Asset-based Lending Market By Type
By Type
  • Inventory Financing
  • Receivables Financing
  • Equipment Financing
  • Others
South Africa Asset-based Lending Market By Interest Rate
By Interest Rate
  • Fixed Rate
  • Floating Rate
South Africa Asset-based Lending Market By End User
By End User
  • Large Enterprises
  • Small and Medium-sized Enterprises
South Africa Asset-based Lending Market By Key Market Players
By Key Market Players
  • JPMorgan Chase And Co.
  • Lloyds Bank
  • Barclays Bank PLC
  • Wells Fargo
  • White Oak Financial, LLC
  • First National Bank
  • Investec
  • African Bank
  • Citigroup Inc.
  • HSBC Bank plc

Analyst Review

The market for South Africa asset-based lending has witnessed a rise owing to increase in demand for automated underwritings, growth in internet of things (IoT) & cloud-based service use, and surge in acceptance of these technologies. In addition, asset-lending and mortgages have undergone a considerable transition similar to other sectors of banking, which is in many aspects reinventing and redefining this vital area for both current and future market participants. Furthermore, automated follow-up calls, automated loan granting, automated document management, and automated reporting are anticipated to boost the growth of the market in upcoming years.

The COVID-19 outbreak had a moderate impact on the South Africa asset-based lending market. Moreover, the pandemic led to a huge demand for digital lending services that are provided through channels that do not require any physical touch, including over the phone via the contact center, on mobile devices, or via desktop applications.

The South Africa asset-based lending market is fragmented with the presence of key players such as JPMorgan Chase And Co., Lloyds Bank, Barclays Bank PLC, Wells Fargo, White Oak Financial, LLC, First National Bank, Investec, African Bank, Citigroup Inc., and HSBC Bank plc. Major players operating in this market have witnessed significant adoption of strategies that include business expansion and partnership to reduce supply and demand gap. With increase in awareness & demand for South Africa asset-based lending, major players have collaborated their product portfolio to provide differentiated and innovative products.

Author Name(s) : Sourabh Ekre| Kanhaiya Kathoke | Vineet Kumar

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South Africa Asset-based Lending Market