From Groundhog Day to Gladiator: Factoring, ABL and the Year Ahead
Written By: Gen Merritt-Parikh, President of Haversine Funding
Looking back at 2024, it was a year that highlighted the ongoing evolution of factoring and asset-based lending (ABL). The past year wasn’t defined by a singular trend, but rather by shifts and movements that continue to reshape the industry. Between ever-changing developments in the banking industry, unrelenting staffing challenges and continually improving technological offerings, one could be forgiven for feeling exhausted. Add to that, emerging fraud risks and growing participation partner and capital needs for factors and lenders looking to grow and diversify risk. 2024 laid the groundwork for what promises to be an active, interesting, and transformative 2025.
In many ways, 2024 felt like living through Groundhog Day, where recurring challenges and unpredictable patterns dominated the year. However, as we move into 2025, the tone bleeds into something more akin to Gladiator II – time to step into the arena of specialty finance ready to execute, grow, and face challenges head-on.
2024: Living Through Groundhog Day
In Groundhog Day, Bill Murray’s character relives the same day repeatedly, stuck in a loop where progress (and escape) feels just out of reach. [As an aside, great movie!] For many in the factoring and ABL industry, 2024 mirrored this experience. While there were signs of growth and innovation, many challenges seemed to replay on an endless loop.
The early months of 2024 saw an uptick in activity as small and mid-sized businesses sought alternative financing options to navigate economic uncertainty. In aggregate, banks remained conservative in general, still processing the lessons from Silicon Valley Bank, leading many companies to turn to non-bank lenders for their working capital needs.
The roll-over deals from 2023 helped start off the year with serious momentum, and that momentum continued well into the second quarter of 2024 as companies were effectively pushed into alternative financing options as the most viable funding solutions. Yet, much like Murray’s repetitive alarm clock, recurring challenges defined the year.
Deal flow was high at the outset of 2024, stalled during the summer, then started to regain pace near the end of Q3. Concerns over the election seemed to deflate dealmaking for most of the fourth quarter. Once the election cycle concluded, signs of a resumption of dealmaking reemerged. 2024 was a roller coaster of start, stop and continue.
Additionally, staffing shortages persisted, particularly for roles requiring niche expertise in underwriting, credit oversight, and portfolio management. Companies sought solutions through outsourcing and technology, but these measures were not seamlessly implemented. Initially, automated solutions lacked the benefit of unique experience and talent for handling the bespoke operations required in specialty finance. Quick-fix solutions continue to be elusive. The issue of insufficient talent remained a recurring theme left over from the prior year continuing through 2024, forcing firms to find creative ways to operate with leaner teams.
Meanwhile, the banking industry was generally inconsistent, creating uncertainty in the market. Many banks were in a holding pattern going into 2024 as they worked to monitor the macroeconomic while addressing internal issues carried over from the prior year. For factors and ABL firms seeking capital, by mid-2024, many lender finance banks aggressively expanded their lending programs, working with newer or growing factoring and ABL entrants and broadening collateral availability. Others remained cautious, holding firm to their line limits due to capital restraints, diminishing deposit levels, and troublesome accounts in their bank portfolios.
Altogether these events muddled signals left the players to manage in a market marked with inconsistency. In Haversine’s case, we saw some factors and ABL firms refinance and obtain new bank senior lines, while others upgraded their existing bank lender finance lines requiring more Haversine junior capital (sub-debt) to support that growth. Then still, other banks were not willing to expand or increase their exposure because of their internal struggles, giving opportunities for Haversine to provide more flexible senior line funding solutions to these factors and lenders.
These currents ran through general factoring and ABL, as well as equipment lending. Transportation factoring, already under pressure, continued to struggle through 2024. In many ways, 2024 felt like a year spent recalibrating – finding solutions, figuring things out, gearing up, adjusting, and formulating new plans for the next breakthrough. Again, exhausting.
The Role of Technology and Staffing Challenges
In Groundhog Day, breaking the cycle required change – a requirement to commit to change until Bill Murray got it right, forcing a shift in perspective and approach. Similarly, 2024 saw companies attempting to break free from recurring challenges by embracing technology, implementing changes, and addressing staffing gaps. Change is never easy.
Technology became a larger focus as factors, ABL firms, and new vendors in the market worked to improve data access, streamline decision-making, and, increasingly, identify fraud. Fraud detection technologies gained traction in transportation mostly but began broadening into general factoring markets. At the same time, automation tools and AI offered opportunities for efficiency, enabling companies to manage portfolios with fewer team members. Still, some of these advancements often felt like incremental progress rather than transformative change.
Staffing challenges compounded these issues. With the days of government stimulus and easy money behind us, finance companies have had to contend this last year with more financially strained clients and borrowers. Increasing the strain, many lenders still have more aggressive lending structures in place from years past - higher advance rates, overadvances and term loans, or overvalued and under monitored collateral. The accumulated obstacles have led to an increase in watch account portfolio activity, requiring more oversight, but finding experienced talent to handle these demands has been like searching for a unicorn.
Yes, outsourcing has gained traction, particularly in underwriting and workout activity, but factoring and ABL firms continued to grapple with the balance between human expertise and technological efficiency, especially when more knowledge is needed in assessing and monitoring credits today.
2025: Entering the Arena
If 2024 was about recalibrating and trying to escape the cycle, 2025 is about stepping into the arena, ready to fight for growth. Gladiator II offers a fitting metaphor for what lies ahead: preparation, strategy, and resilience will be key as the factoring and ABL industry faces a year of execution and opportunity.
1. Strategic Preparation for Battle
In Gladiator II, the hero’s success depends on meticulous preparation - knowing his opponents, refining his skills, and having a plan. For factors and lenders, 2025 is about executing plans built during 2024. Strengthening origination channels, leveraging technology, and expanding partnerships will be critical for positioning in an increasingly competitive market. Companies that have relied on limited sales efforts must double down on strategies to attract and retain business, refine marketing initiatives, and build stronger partnerships.
2. Competing Fiercely in a Crowded Market
The arena battles in the movie reflect the heightened competition in factoring and ABL. Consolidation will continue as family offices and private equity investors bring fresh capital into the space while pushing higher premiums in M&A deals. To justify higher premiums, acquirers will have ambitious sales growth goals, which can also mean aggressive deal structures with more competitive rates. Meanwhile, these new entrants with their own growth targets will put pressure on existing players. Success in this environment will require speed, flexibility, and specialized offerings. Additionally, expertise becomes an increasingly distinguishing competitive trait. Those who step into the arena with strong sales strategies, operational efficiency, and expert teams will have the upper hand.
3. Balancing Risk and Reward
In the movie, every tactic carries risk - and the same is true for 2025. Factoring and ABL firms must carefully balance growth opportunities with rigorous underwriting standards. Exit strategies in evaluating new and existing deals will be critical. If it’s been a while since you’ve walked through the exit strategy for your clients and borrowers, now would be a good time to analyze those positions again. This allows the opportunity to potentially shore up holes, collateral and plans in a worse case scenario.
In 2025, underwriting – more than ever – will take center stage as companies dig in even more on new business opportunities and monitor their portfolios more closely to mitigate risk. Credit expertise will be invaluable, making the hunt for talented underwriters – the unicorns of specialty finance – even more critical.
4. Technology and Talent
Technology will continue to shape the battlefield in 2025. AI and automation will streamline processes, particularly in underwriting and portfolio management, but the human element remains key. Firms will need to navigate the balance between leveraging technology and retaining experienced professionals. Outsourcing will remain a viable solution for many, but integrating new tools effectively will determine long-term success.
5. Facing Challenges Head-On
The gladiator’s resilience and determination are central to the journey, and 2025 demands the same from factoring and ABL companies. Already an industry characterized by resilient players, this is nothing new. But, new competition and an evolving landscape, more deals to review all with their own growth needs for the year, borrower and client challenges, internal staffing shortages, increased fraud and delinquency trends, and higher regulatory complexity will continue to test the industry. Those who confront these challenges head-on, with a clear strategy and the right teams and partnerships (capital partners included), will emerge stronger.
Final Thoughts: Are You Ready for Battle?
2025 is shaping up to be a year of growth, execution, and opportunity. The year holds promise. The industry is poised for action. Success will require preparation, adaptability, and continued resilience. That leads to the question, “Have you finalized your plans to execute your 2025 goals successfully? Are you prepared to compete, innovate, and grow?”. Welcome to 2025!
About Gen Merritt-Parikh
Gen Merritt-Parikh is the President of Haversine Funding. With more than 25 years of experience in commercial finance, she is responsible for originations, underwriting, investment analysis, and management and asset allocation strategy. In 2018, as President of Allied Affiliated Funding, she led the company to a successful sale to a nationally chartered bank. Previously, Gen worked in the factoring and asset-based lending space with companies including Liquid Capital, Comresco Capital and Guaranty Business Credit. She holds a Bachelor of Arts degree in Business and Economics from the University of Texas at Dallas, serves on the Factoring Committee for the Secured Finance Network (SFNet) and holds the Subject Matter Expert designation by the International Factoring Association, having helped develop the first factoring certification program for the industry. She was recognized by the ABF Journal as one of the top women in ABL for 2022 and by SFNet in 2019 as one of the noted women in commercial finance. She joined Haversine Funding in 2020 and resides in the Dallas metroplex with her husband.
The views expressed in the Commercial Factor website are those of the authors and do not necessarily represent the views of, and should not be attributed to, the International Factoring Association.