Understand this lender type
An asset-based lender advances against a defined borrowing base, often built from receivables and inventory. It applies eligibility rules, advance rates, and reserves rather than lending the full accounting value of every asset. Some facilities also include equipment or other collateral, depending on the structure.
How to assess the fit
This route may fit a business with substantial operating assets and dependable reporting. Before approaching a lender, model availability using conservative eligibility assumptions. Show receivables aging, customer concentration, inventory turns, and the controls used to reconcile those records. Explain how sales growth changes both collateral and working-capital needs.
Questions that deserve an answer
Borrowing capacity can shrink when invoices age or inventory becomes less saleable. The most dangerous moment may be a sudden gap between debt outstanding and the permitted borrowing base. Review field-examination costs, reporting deadlines, cash dominion, appraisals, and additional reserves. A large facility limit is useful only to the extent that eligible assets support actual draws.
Your next-step checklist
- Conservative borrowing-base model
- Reliable receivables and inventory reporting
- Existing liens and collateral priority
- Availability under a customer delay or inventory write-down
Crack this combination.
Does the stated facility limit always equal available cash?
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Sources & further reading
This file draws on the following references. Product availability and requirements must be confirmed with the provider.
Levr: accounts receivable reportsLevr: inventory reportsLevr: reviewing a debt term sheet