M&A activity snapshot
Specialty finance deal activity is rising in value while deal counts thin out. Houlihan Lokey's S&P Capital IQ data shows 320 specialty finance transactions worth about $59.5 billion in 2025, up from 287 worth $53.6 billion in 2024. That screen spans consumer and commercial lenders and is not limited to U.S. lower-middle-market companies.
The 2024 figure is inflated by one deal: Houlihan Lokey notes it was largely fueled by Capital One's $35.3 billion all-stock acquisition of Discover. In early 2026, Q1 transaction count fell about 17% year over year while value rose about 22%, from roughly $7.5 billion to roughly $9 billion. Houlihan Lokey reads that as a possible shift toward fewer, larger strategic deals.
The underlying markets are large and growing. The Federal Reserve's G.20 release shows finance-company business receivables of $712.2 billion at the end of 2025, including $353.8 billion of equipment loans and leases. That total includes manufacturers' captive finance arms, not only independent lenders.
Equipment finance demand is at a record. ELFA's CapEx Finance Index reached $14.3 billion of new volume in July 2026, 24.5% above its previous monthly high, with ELFA attributing the surge to AI-related investment. Asset-based lending and factoring are also expanding: new commitments to new clients rose 60.9% quarter over quarter at non-bank ABL lenders in Q2 2026, in a survey of 36 lenders.
Who is buying
The buyer universe is wider than in fee-based financial services. Houlihan Lokey names nonbank lenders, private equity firms, asset managers, and insurance companies as the active acquirers of non-bank lenders. Named 2025-26 deals show each type at work.
- Private equity. The Private Equity business within Goldman Sachs Alternatives acquired FGI Worldwide, a working capital and trade credit provider. An investor group led by Warburg Pincus and Goodview Capital closed its acquisition of ECN Capital on April 30, 2026.
- Adjacent-industry strategics. Love's Financial bought three freight factoring providers serving small and midsized trucking fleets on December 19, 2025.
- Independent lender consolidators. CAN Capital acquired Republic Bank's equipment finance portfolio and platform on February 18, 2026, a bank selling to a non-bank. Onset Financial bought Channel, which had provided over $3 billion in financing to more than 30,000 businesses since 2009.
- Insurers and credit managers. Manulife agreed in August 2025 to acquire 75% of Comvest Credit Partners for $937.5 million upfront. Arena Investors launched Empire Asset Finance with $100 million of committed capital for middle-market equipment financing.
Banks are the missing buyer. Historically they paid for higher-yielding loans funded with cheap deposits, and equipment lenders were their most popular specialty-lender target over the decade to 2022. By late 2023, Mercer counted only five bank-buyer specialty finance deals that year, versus 13 in 2022 and a typical 20+ per year before 2022. Houlihan Lokey expects those banks to become active again in 2026, a forecast.
What buyers look for
Diligence on a lender is a credit exercise, not a revenue-quality review. Buyers re-underwrite the book: yield, cost of funds, losses, delinquency trends by vintage, collateral and residual-value exposure, and concentration. Houlihan Lokey reports that platforms with disciplined underwriting, diversified collateral, and scalable servicing capabilities outperformed their peers in Q1 2026.
Spread is the core unit of economics. ELFA's 2024 survey of equipment finance companies put pre-tax yield at 7.40%, cost of funds at 4.81% and the spread at 2.59%. The same survey showed interest expense up 33% and pre-tax income down 14.5%, so buyers test how a book performs when funding costs move.
Funding is part of the product. A target's warehouse lines, securitization access and lender consents can matter as much as its origination engine. Banks increasingly fund non-banks rather than compete with them. The FDIC reports bank loans to nondepository financial institutions reached $1.32 trillion in Q3 2025, more than a third of business lending not secured by real estate. That category also includes private credit funds and mortgage companies.
Licensing and compliance history depends on product. Consumer and small-business lenders carry state licenses whose change-of-control approvals often take 30 to 60 days, and some much longer. Commercial financing disclosure rules now apply in ten states as of March 2026. California regulators entered a consent order in November 2025 with a company that leased equipment without the required disclosures, so past gaps are a diligence item.
What makes a strong company
The lenders that draw the most buyer interest usually show:
- Credit performance at or better than the sector. ELFA reported an equipment finance loss rate of 0.46% in July 2026. SFNet's bank ABL data showed non-accruals of 0.78% and gross write-offs of 0.09%, below 30-year averages of 0.92% and 0.41%.
- A spread that holds up when the cost of funds rises, documented by vintage rather than in aggregate.
- Committed, diversified funding with change-of-control terms that a buyer can work with, not a single warehouse line on short notice.
- A differentiated origination channel. Houlihan Lokey says firms with differentiated origination channels and strong institutional funding relationships are positioned to benefit from consolidation.
- Clean licensing and disclosure records in every state where the company lends, with no open regulatory findings.
- For factors, short collection cycles. SFNet's survey shows average days sales outstanding of 44.0 days in H1 2026.
Valuation and deal structure
Lenders are balance-sheet businesses, so buyers price them on tangible book value and earnings, not EBITDA. Interest expense is the main cost of the product, which makes EBITDA a poor measure. Houlihan Lokey's public comparables report price to pre-tax income, P/E, price to tangible book value and ROE for the sector. Price to tangible book equals P/E times ROE, so higher sustained returns support a higher multiple of book.
Public companies are the only current, citable reference point. As of May 1, 2026, public specialty finance companies traded at a median 2.6x price to tangible book and 9.6x 2026 estimated earnings. The commercial finance group, also at a median 2.6x book, is dominated by large aircraft, railcar and fleet lessors. These are trading multiples of large public companies, not deal multiples.
Private lower-middle-market lender transaction multiples are not publicly tracked. Mercer Capital states that pricing data for specialty finance acquisitions is limited and these businesses tend to transact at lower multiples largely due to the risk factor. An owner should treat public figures as an upper reference, not a benchmark for a private sale.
Structure follows the regulatory map. Where a target holds licenses in prior-approval states, Goodwin advises that the deal must be structured as a sign and delayed close, conditioned on regulator approvals. The license trigger is usually a 10% change in ownership, ranging from 5% to 25% by state. Commercial-only equipment lessors and factors often face fewer licenses than consumer or small-business lenders.
Federal small-business data rules are lighter than expected. The CFPB's final Section 1071 rule raises the coverage threshold from 100 to 1,000 covered transactions in each of two consecutive years. It also excludes merchant cash advances, factoring and true leases. Public sources do not document typical earnouts, holdbacks or book-value adjustments in lender deals, so this page does not cite ranges.
Outlook
Demand-side signals are strong for the next 12-24 months. ELFA's index shows year-to-date new volume up 16.8% through July 2026, with a full-year forecast of $137.3 billion, which would beat the 2024 record by 14.0%. That is a forecast for surveyed members. Factoring volume rose 26.3% year over year at large-volume factors in H1 2026.
Capital is moving toward non-bank lenders. Fed Vice Chair for Supervision Bowman noted that the bank share of corporate lending fell from 48 percent in 2015 to 29 percent in 2025, with private credit a major driver. Insurers and credit managers buying origination platforms, along with an expected return of bank buyers, would add bidders for well-run lenders.
The risks are funding cost and credit dispersion. The ELFA Foundation's 2026 outlook notes that investors are increasingly wary that an AI-driven correction could disrupt both markets and capital spending. Houlihan Lokey sees an increased spread between well-positioned platforms and those with more challenged credits. Lenders with clean vintages and committed funding should keep the widest choice of buyers.
Own a specialty finance or lending business and want a reference point before you talk to anyone? Run the valuation tool or read the financial services M&A overview. See also: why vertical-specific buyers outperform generalists in outbound.