The seat nobody writes from

From my perspective every analysis of who funds asset-based finance is written from the allocator’s chair. The borrower’s chair is where the risk lands.

A business with a working capital or warehouse facility spends its energy on the things it controls. Collections. Dilution. Obligor concentration. Covenant headroom. The borrowing base report that goes out every day, week or month.

None of that determines whether the facility is there next quarter. A facility can be withdrawn while every one of those measures is inside its limit, for reasons that sit two or three layers above the borrower and have nothing to do with performance.

That risk is rarely priced, rarely disclosed and almost never written about, because the people who write about funding sources are looking down the structure rather than up it. The borrower is, normally, not going to write about their challenges, and the withdrawn funder is just trying to get their money back. It is an uncharted challenge that usually only is raised with bank runs, or macro events.

Two cases where it happened

In March 2021, clients of a supply chain finance platform lost their facilities. The cause was not a credit event in their receivables. Cover on the funder side was not renewed by the insurers who had been supporting it, and USD 10 billion of connected funds were frozen. Businesses that had performed exactly as agreed found their financing gone within days, and in several cases their own solvency followed. It was a funder-side collapse transmitted straight through to the borrower.

In 2023, the failure of several US regional banks curtailed lending to non-depository financial institutions. Originators that had done nothing differently found their warehouse capacity reduced or repriced because of what had happened on their lender’s balance sheet.

Neither case involved a borrower underperforming. Both ended with borrowers losing facilities.

These are small scale events when compared to the GFC or national banking crises driven by currency or sovereign events. We are seeing some dislocation in direct lending, and the ramifications are yet to truly hit borrowers. We are all familiar with amend and pretend but when liquidity goes, it is often self-liquidating/amortising structures that are hit first as the very protections for investors serve to make it the most flexible way of reducing exposure without material risk to principal.

The banks did not leave, they changed seat

In most tellings of the last decade is that banks retreated from asset-backed lending and non-bank capital filled the gap. The first half of that is now questionable. US bank lending to non-depository financial institutions stood at roughly USD 1.4 trillion at the end of 2025, about 5.6% of industry assets, growing at roughly 22.7% a year on FDIC figures. That is among the fastest-growing large lending categories in the system.

Banks have not withdrawn from the asset. They have moved up a layer, from originating the facility to providing leverage to the fund that originates it. For a borrower that distinction is not academic. Bank risk appetite still reaches the facility, but it now arrives through an intermediary, with an extra set of covenants and an extra set of triggers between the borrower and the capital. This insulates the bank but exposes the borrower to new challenges when their facilities hinge on the tactics, strategy and success of a more nimble or fickle investor. This is not a smart money/dumb money thing but an additional layer or challenge for businesses working to understand their exposure.

How each funder leaves, mechanically

Worth setting out plainly, because the notice a borrower gets varies by more than an order of magnitude depending on what sits behind the facility.

• Bank senior, at the leverage layer. Withdrawal arrives as facility non-renewal at review date, a margin call, or a stop-funding event on a borrowing base test. Many facilities are uncommitted or carry material adverse change provisions, and a surprising number of borrowers do not know which of their lines are which.
• Life and annuity insurance would look for ratings-driven non-reinvestment or sale of a tranche into the secondary market. Slow and orderly. In practice this is the longest notice available from any funder in the leverage layer, which is the strongest argument for it and the one least often made.
• Short-tail insurance is normally non-reinvestment as short tranches mature, and liquidation if catastrophe claims arrive. The tenor is short by construction, so the portfolio runs off quickly once the decision is taken. Asset, liability and liquidity alignment does the work.
• Term-committed LP capital, closed-end, is contractually committed for the life of the fund. This is the longest notice of any funder in the structure. Semi-liquid wrappers transmit some redemption pressure, but caps and gates can slow it.
• Stablecoin-sponsored capital will likely be uncommitted and evergreen, with no notice period disclosed. Withdrawal can be triggered by a token run, a sponsor liquidity event or a discretionary suspension, none of which relate to the assets.

KYL, know your lender

These are not clever questions, as I have drafted them, but they are the ones that determine whether a facility survives a shock that has nothing to do with the borrower.

• Is this facility committed or uncommitted, and where in the document does it say so? A material adverse change clause in a facility described verbally as committed is an uncommitted facility with better manners.
• What is the notice period on non-renewal, and what must happen for it to shorten? The answer distinguishes a funder that gives a year from one that gives a fortnight.
• What sits behind you, and what would make that capital leave for reasons unrelated to my performance? Most originators can answer the first part. Very few can answer the second, and the second is the one that matters. You can dig into the book, but rarely will a fund or institution provide the detail needed to get the answer a borrower really needs to understand the risk. On top of that, borrowers are not not in the business of non-bank financial counter party risk management…

Why this is worth the awkwardness

A borrower asking a lender about the lender’s own funding feels like a role reversal, and some lenders will treat it as one, and will have some very quick responses as to why they can’t/won’t play ball. It is nevertheless the same diligence the lender is running in the other direction. An originator that cannot describe its own funding stack is telling you something, and what it is telling you will matter more to the survival of the facility than another twenty basis points on the margin.

The lesson from 2021 is not that supply chain finance was a flawed product. It is that performing borrowers lost facilities because of a decision taken by an insurer they had never met, about a risk they were never told about, in a structure they had never seen. Structural transparency is not a courtesy extended to borrowers. It is a critical thing that may tell them whether their financing is durable.

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