Asset-Based Lenders Shift Focus to Collateral Ahead of Potential Fed Hike

Asset-based lenders have been writing borrowing bases rather than pricing grids as of late. This approach was evident in two recent deals, where Smart Sand and Air T amended their senior secured asset-based credit agreements to increase revolving commitments.

The amendment by Smart Sand, effective September 1, increased revolving commitments from $30 million to $50 million and extended the maturity date to September 1, 2031. The incremental commitment was supported by a $20 million sublimit in the borrowing base against the Oakdale, Wisconsin real property.

Air T's Amendment No. 7 with Alerus Financial also took place on September 1. The revolver rose from $20.0 million to $25.0 million across nine borrowers, and the overline commitment was terminated.

The two deals demonstrate that asset-based lenders are taking a cautious approach by focusing on collateral rather than pricing grids. This strategy is particularly relevant given the recent Bureau of Labor Statistics report, which showed 162,000 nonfarm payroll additions in August and revised June and July figures up a combined 55,000.

The federal funds target range remains at 3.50 to 3.75 percent, and futures repriced the September 15-16 FOMC from a hold to a hike, with CME FedWatch odds of a quarter-point increase moving from 49.4 percent Thursday to roughly 58 percent by Friday's close.

The two-year Treasury finished at 4.377 percent, its highest level since January 2025, and the ten-year at 4.784 percent. The borrowing-base discipline visible in these deals is expected to outperform cash-flow paper if the Fed follows through with a hike.