-

KBRA Releases Research – Unpacking Small Business ABS: Essential Insights for a Maturing Asset Class

NEW YORK--(BUSINESS WIRE)--KBRA releases research analyzing the small business lending (SBL) sector, which has emerged as a meaningful asset class within structured finance, driven by alternative capital sources, fintech innovation, and shifting borrower demand. Over the past decade, KBRA has rated more than $14 billion in small business ABS in the United States.

This report provides an overview of the changing SBL landscape, with a focus on term loans, lines of credit (LoC), and merchant cash advances (MCA). Further, we examine origination channels and practices that shape borrower acquisition and their implications for ABS structures and considers the role of guarantees, security interests, and regulatory factors in influencing credit performance.

Key Takeaways

  • Nonbank and fintech lenders have become vital sources of working capital for small businesses, using data-driven underwriting to fill the gap left by traditional banks and expanding the pool of collateral for small business ABS. As of 2024, their share of applications stood at 24%, increasing from 17% in 2020.
  • Term loans, LoCs, and MCAs each carry distinct legal, structural, and credit risk considerations. Unlike term loans and LoCs, MCAs are not considered debt and therefore have limited avenues of recourse for lenders relative to loans and LoCs.
  • The mix of direct originations versus broker-driven channels may impact portfolio quality, with direct originations typically leading to higher quality applicants, while syndication arrangements increasingly serve to align interests and extend lending capacity.
  • The use of performance or personal guarantees and Uniform Commercial Code (UCC) filings establishes varying levels of lender protection and affects recoveries in stress scenarios.
  • A growing patchwork of state laws now requires consumer-style disclosures for small business financing, including annual percentage rate (APR) and total repayment terms. These rules vary across jurisdictions, creating operational complexity and potential liability for interstate or national lenders. Products like MCAs, which do not naturally fit into APR frameworks, face heightened compliance challenges—raising legal, reputational, and competitive risks for issuers.

Click here to view the report.

Recent Publications

About KBRA

KBRA, one of the major credit rating agencies, is registered in the U.S., EU, and the UK. KBRA is recognized as a Qualified Rating Agency in Taiwan, and is also a Designated Rating Organization for structured finance ratings in Canada. As a full-service credit rating agency, investors can use KBRA ratings for regulatory capital purposes in multiple jurisdictions.

Doc ID: 1011773

Contacts

Maxim Berger
Senior Director
+1 646-731-1260
maxim.berger@kbra.com

Jack Kahan
Senior Managing Director, Global Head of ABS & RMBS
+1 646-731-2486
jack.kahan@kbra.com

Yee Cent Wong
Senior Managing Director, Lead Analytical Manager, Structured Finance Ratings
+1 646-731-2374
yee.cent.wong@kbra.com

Media Contact

Adam Tempkin
Senior Director of Communications
+1 646-731-1347
adam.tempkin@kbra.com

Business Development Contact

Arielle Smelkinson
Senior Director
+1 646-731-2369
arielle.smelkinson@kbra.com

Kroll Bond Rating Agency, LLC

Details
Headquarters: New York City, New York
CEO: Jim Nadler
Employees: 400+
Organization: PRI

Release Versions

Contacts

Maxim Berger
Senior Director
+1 646-731-1260
maxim.berger@kbra.com

Jack Kahan
Senior Managing Director, Global Head of ABS & RMBS
+1 646-731-2486
jack.kahan@kbra.com

Yee Cent Wong
Senior Managing Director, Lead Analytical Manager, Structured Finance Ratings
+1 646-731-2374
yee.cent.wong@kbra.com

Media Contact

Adam Tempkin
Senior Director of Communications
+1 646-731-1347
adam.tempkin@kbra.com

Business Development Contact

Arielle Smelkinson
Senior Director
+1 646-731-2369
arielle.smelkinson@kbra.com

Social Media Profiles
More News From Kroll Bond Rating Agency, LLC

KBRA Assigns Preliminary Ratings to BMO 2025-5C13

NEW YORK--(BUSINESS WIRE)--KBRA is pleased to announce the assignment of preliminary ratings to 13 classes of BMO 2025-5C13, a $551.8 million CMBS conduit transaction collateralized by 29 commercial mortgage loans secured by 36 properties. The collateral properties are located throughout 14 MSAs, of which the three largest are New York (33.1% of pool balance), Las Vegas (12.3%), and Los Angeles (7.9%). The pool has exposure to all major property types, with four types representing more than 10....

KBRA Analytics’ KCP Expands CMBS Loan-Level Offering Within INTEXcalc Platform

NEW YORK--(BUSINESS WIRE)--KBRA Analytics, the data and analytics division of KBRA, is pleased to announce an expansion of its partnership between the KBRA Credit Profile (KCP) platform and Intex Solutions, a leading provider of structured finance cashflow models and analytical solutions. KCP is KBRA Analytics’ premier platform for CMBS loan-level loss projections, timing, and detailed credit analysis produced by its 40-person analytical team. The collaboration enables Intex users to access KCP...

KBRA Assigns Preliminary Ratings to CROSS 2025-H10 Mortgage Trust

NEW YORK--(BUSINESS WIRE)--KBRA assigns preliminary ratings to eight classes of mortgage pass-through certificates from CROSS 2025-H10 Mortgage Trust, an RMBS transaction issued under the CROSS shelf, where Hildene in affiliation with CrossCountry Mortgage and CrossCountry Capital sponsored the transaction. The $328.4 million transaction is collateralized by a pool of 576 residential mortgages originated by CCM, including a meaningful concentration of collateral that KBRA considers to be “non-p...
Back to Newsroom