Even in downturns, some sectors do well. Not surprisingly, the asset-based lending world often is among them, as companies look for alternatives to scarce bank debt. Asset-based lending – that is, any loan that’s secured by an asset, such as inventory or accounts receivable – grew 8 percent in 2008 to nearly $600 billion in loans outstanding, reports the Commercial Finance Association (CFA), a trade group.

Industries in which asset-based lending has been most prevalent include retail, steel, and food. However, these industries account for less than one-third of total outstanding loans, as asset-based loans become more common across the economy, the CFA noted.

Another sign of asset-based lending’s move to the mainstream is the emergence of a number of big financial firms, including GE Capital, Bank of America, and Wells Fargo, into the market. What’s more, with the exception of 2001, the volume of outstanding asset-based loans has shown year-over-year growth since 1992, says Brian Cove, the CFA’s chief operating officer.

While asset-based lending has turned in a solid performance even as the economy has tightened, that doesn’t mean it’s been immune to the damages wrought by the downturn. Non-accruing loans as a percent of total asset-based loans jumped 57 basis points in the first quarter of 2009. Additionally, 18 percent of asset-based lenders reported an increase in write-offs between the fourth quarter of 2008 and the first quarter of 2009. However, total gross write-offs as a percent of total asset-based loans outstanding are around 50 basis points, which has been the industry median for the past 15 years.

One sign that may bode well for the economy overall, and not just the asset-based lending sector: Nearly two-thirds of lenders reported an increase in new credit commitments in the first quarter of 2009, the CFA reports. That compares with just 8 percent in the last quarter of 2008. “This positive movement is most likely an indicator that the economy may be turning a corner and U.S. businesses have confidence to obtain new financing to fund their operations,” Cove says. Let’s hope he’s right. ###