Execution, Not Capital, Will Decide Winners in European ABF Market
U.S. private capital managers are looking hard at Europe’s asset-based finance (ABF) market. The appeal1 is obvious. Regulatory pressure is driving banks to pull back from lending. Private credit fundraising in Europe just hit record highs2. And investors are hungry for differentiated yield strategies—and especially those backed by real assets.
Those factors cast a rosy glow on the European ABF opportunity. But just below the surface, a set of complicating factors appears. Europe’s ABF market may be growing, but it is still less than one-third the size of the U.S. market—roughly $1.8 trillion compared to $6 trillion—according to Alliance Bernstein. While that gap points to real upside in Europe, it also implies that factors may be in place that hamper growth.
One possibility may be the lack of a single legal structure, which despite overarching regulation in some areas by the European Union, doesn’t exist for the ABF market. As a result, Europe’s patch quilt of national rules in this area — where collateral rights, enforcement processes, and borrower protections often change with every border crossing — likely contribute to ABF’s slower growth by increasing the impediments to operational efficiency.
Firms that succeed in Europe, therefore, will not necessarily be the first or fastest movers. Instead, they will be those with the infrastructure to support the complexity that comes with the varied landscape. The winners will be those with robust connectivity to servicing platforms as well as sufficient data management know-how to operate in Europe’s fragmented environment.
Why Europe is ripe for ABF now
For asset managers that position themselves strategically for the operational challenges, however, Europe’s ABF market will have much to offer.
On the demand side, institutions of all sizes are looking for investment-grade credits that can offer yields greater than those available in public markets. While the European Central Bank may be near the end of its rate-cutting cycle, investors continue to search for yield and the generally high quality of asset-backed credits combined with the higher rates borrowers are willing to pay, continue to fuel demand.
The picture is also bright on the supply side. Asset managers are meeting pressing supply needs as European banks continue to retrench3 from lending on the heels of Basel III Endgame and tighter ECB oversight.3 This is especially the case in specialized and mid-market lending. Well-known institutions that once drove growth in asset-backed strategies are now pulling back, leaving a widening gap in core financing areas.
Private capital is moving to fill that financing gap. Private market fundraising in Europe hit record highs4 in 2023, with strong momentum behind non-bank lenders. The capital is there. Apollo Global Management, for example, secured a $5 billion commitment5 from BNP Paribas in 2024 to expand its investment-grade, asset-backed credit activities globally, including in Europe.
Governments are shifting the ground under lenders’ feet as well. Germany and the Netherlands, for instance, are reforming capital markets laws6 to attract more private capital and alternative lenders. Where regulators once treated private lenders as secondary players in Europe’s credit markets, governments are now clearing regulatory paths7 to make non-bank capital a core part of the financial system.
Even technology no longer presents the friction point it once did. Cross-border operational infrastructure, which made cross-border servicing a bottleneck, now includes cloud-native credit platforms, real-time risk systems and artificial intelligence and machine learning applied to risk scoring and borrower decision-making. In fact, infrastructure has matured sufficiently to support multi-jurisdiction lending8 at scale. Today, firms that invest early in operational resilience can move faster and control risk more effectively than ever before.
Underserved markets, untapped demand
Perhaps one of the strongest areas of ABF financing demand comes from small and medium-sized enterprises. In this area, otherwise known as SME lending, traditional sources of financing, largely regional and national banks, have tightened credit standards due to regulation that discourages risk-taking. As a result, many small and medium-sized businesses are underserved. Exporters, who once counted on steady bank guarantees, also now have fewer options to move goods or to fund operations. The same adverse dynamics also are affecting real estate developers,9 who need financing to reposition properties and build logistics hubs.
While banks are stepping away from secured lending, demand has not disappeared. Private lenders are filling this gap, but to arrange and manage loans efficiently, they must eliminate the operational frictions that ultimately result in reduced profitability.
Removing those frictions requires having the data management tools and tech infrastructure that firms are discovering can most efficiently be provided by specialized third-party providers. Firms will have to work through fragmented collateral rules, uneven enforcement processes, and servicing structures that change from one jurisdiction to the next.
Meeting four ABF execution challenges
Private lenders in the European ABF market are finding four primary challenges where operational efficiency is critical:
Local servicing: Firms cannot lend into Europe from a distance and expect to maintain full control. They need servicing and collections networks on the ground—not just to enforce collateral rights, but to maintain borrower relationships in markets where legal standards and cultural expectations differ sharply. Without local presence, firms lose control of both assets and timelines.
Compliance: Europe’s regulatory landscape does not match the unified structure that firms are accustomed to in the U.S. In Europe, standards change at the border. Disclosure rules, borrower protections, and regulatory oversight vary from one jurisdiction to the next. Staying compliant with as many as 27 different legal, tax and regulatory regimes is not a matter of tweaking a set of standardized policies. Instead, it requires building an operational infrastructure that is equipped to handle specific and distinct know-your-customer standards, data reporting structures, disclosure protocols, and consumer protection frameworks. Firms that underestimate this complexity risk creating operational gaps that local regulators will be drawn to when they review a firm’s operations.
Collateral management: Rules governing liens, collateral perfection, recovery timelines, and bankruptcy procedures also differ sharply across jurisdictions. A loan structure that secures an asset effectively in Germany may offer much weaker protections in Spain or Italy. Firms that fail to adjust for these variations will find their risk models—and their recoveries—undermined under stress.
Transparency: Investors and regulators, not to mention a firm’s top management and risk officers, demand real-time visibility into performance, exposures, and regulatory compliance. Maintaining that level of oversight across multiple countries demands integrated data infrastructure—not after-the-fact reporting cobbled together from local operators.
Because jurisdiction-specific risk sits at the center of operational control, firms that overlook Europe’s balkanized regulatory regimes or treat operational complexity as an issue that can be kicked down the road may lose control of servicing, regulatory standing, and recovery rights—and see a drop in investor confidence—faster than they expect.
The takeaways in what it takes to win
Winning in Europe’s ABF market comes down to how early, how seriously, and how thoroughly firms build the operational foundation to support the market’s needs and unique legal and regulatory structures.
The firms that get it right will start by building jurisdiction-specific legal, tax, and compliance structures market by market. Operational control is key as asset managers enforce collateral rights and manage borrower engagement in fragmented legal environments. Firms also need cloud-native, multi-jurisdictional credit and servicing platforms that support real-time monitoring of exposures, borrower activity, and regulatory compliance across markets. Those systems must also catch operational exceptions early without losing the local control that collateral-backed strategies depend on.
Firms need systems that can aggregate loan and collateral data across jurisdictions, track asset performance in real time, automate cash flow servicing, and dynamically validate borrowing base eligibility as asset pools shift. What’s more, they need the ability to connect all systems and sources, handle asset lifecycle events, accomplish accounting at the investor and investment level, and perform reconciliations.
In addition to systems, oversight must also evolve to accommodate Europe’s fragmented legal and regulatory environment.
Finally, the quality of local partners—law firms, servicing specialists, regulatory advisors, banks and fund administrators—matter more than ever. Firms that build the best local relationships will not just move faster, they will avoid the kinds of regulatory missteps that are hard to fix once reputation damage sets in.
Firms that win in Europe will be those that build strong operational infrastructures, compliance systems, and partnerships—and stay disciplined as they scale.
Related reading:
- The Future Outlook of Asset-Based Finance
- How Asset-Based Finance Is Reshaping the Non-Bank Lending Industry
Sources:
- 1.Europe: The Next Frontier in Asset-Based Finance, AllianceBernstein, March 14, 2025
- 2.Private Credit Paychecks Jump as Asset-Based Lending Expands, Bloomberg, March 3, 2025
- 3.ECB cuts rates on weak growth, markets bet on more easing, Reuters, April 17, 2025
- 4.Private Credit Paychecks Jump as Asset-Based Lending Expands, Bloomberg, March 3, 2025
- 5.Apollo Snags $5 Billion From BNP to Expand Private Credit Bets, Bloomberg, September 20, 2024
- 6.The Netherlands' Commitment to the Capital Markets Union, Government of the Netherlands
- 7.Private Credit Funds Are Set to Get Their First Major Set of Rules in Europe, Bloomberg, February 19, 2024
- 8.Technologies and services banks can use to meet the G20’s goals on cross-border payments, Temenos, April 19, 2025
- 9.The debt funding gap for European real estate, CBRE, December 13, 2023
- 10.Capital Markets Union: Europe must stop beating around the bush, Jacques Delors Center, November 7, 2024
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