What is an ABL borrowing base?

Borrowing base = the maximum amount an asset-based lender will advance against eligible collateral. Calculated as: (eligible AR × advance rate) + (eligible inventory × advance rate) + (equipment × OLV advance rate) − reserves. The borrowing base fluctuates daily with collateral value. Total facility availability = borrowing base OR stated commitment, whichever is lower. Monthly borrowing-base certificate verifies collateral; annual field exam audits the certificate.

What are typical ABL advance rates?

Standard advance rates by collateral (May 2026): eligible AR 80-85% (deduct dilution + concentration ineligibles), finished goods inventory 50-60%, raw materials 40-55%, work-in-process typically excluded or 30-40%, equipment 50-75% of orderly liquidation value (OLV) appraisal, real estate 65-75% of FMV. Total borrowing base = sum minus reserves (typically 10-15% blended).

What makes AR ineligible in an ABL borrowing base?

Common AR ineligibles: invoices >90 days past due, foreign-customer AR, intra-company AR, government AR (some lenders), affiliated-party AR, single-customer concentration above limit (typically 20-25%, occasionally up to 40% for investment-grade obligors), retainage AR, contra accounts, disputed invoices, billed-not-shipped invoices. Cross-aging: if 25%+ of a customer's AR is >90 days past due, the customer's ENTIRE AR becomes ineligible.

How is inventory advance rate determined?

Inventory advance rates by category (May 2026 standards): finished goods 50-60% (deduct slow-moving + obsolete), raw materials 40-55% (deduct specialty inventory hard to liquidate), work-in-process typically 0-40% (lender-specific; often excluded entirely on engineered-to-order). Inventory advance rates lower than AR because liquidation values are uncertain and slower. Field-exam appraisal validates inventory classification + obsolete reserves at facility close + annually.

What is OLV (orderly liquidation value)?

OLV = orderly liquidation value. The estimated price equipment would sell for in an orderly auction or private sale within 90-180 days under typical market conditions (not forced/distressed sale). Performed by a third-party appraiser. ABL advance rate against equipment is 50-75% of OLV, meaning if appraiser determines OLV is $1M, ABL advances $500K-$750K. Equipment OLV declines with age; appraisals typically refreshed every 1-3 years.

What's the difference between bank ABL and specialty ABL?

Bank ABL platforms price 7.50% to 10.50% APR with strict requirements ($20M+ revenue, audited financials, EBITDA positive). Specialty / non-bank ABL prices 9.50-13.50% APR but accepts more challenging borrowers, turnaround situations, smaller revenue, recent losses, weaker covenants. Specialty ABL is the bridge between transactional factoring and bank ABL eligibility.

ABL Borrowing Base Calculator | Free Tool

Collateral & Advance Rates

Eligible AR

AR Advance %

Finished Goods

FG Advance %

Raw Materials

RM Advance %

Equipment OLV

Equipment Advance %

Reserves (% blended)

Requested Facility Commitment

Standard advances: AR 80-85%, FG 50-60%, RM 40-55%, Equipment 50-75% of OLV. Reserves 10-15% blended.

Borrowing Base

Component	Base
AR	$4.10M
Finished Goods	$825K
Raw Materials	$360K
Equipment	$1.20M
Gross Base	$6.49M
Reserves	−$649K
Net Borrowing Base	$5.84M

Facility Availability

$5.84M

Borrowing base BINDS at $5.84M (less than $8.00M commitment)

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Indicative only. Actual ABL borrowing base varies by lender ineligibility definitions, field-exam findings, and dynamic dilution / chargeback / concentration adjustments.

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How ABL Sizing Works in Practice

Borrowing base = max amount the ABL lender will advance against eligible collateral, calculated daily. Standard formula: (eligible AR × 80-85%) + (finished goods × 50-60%) + (raw materials × 40-55%) + (equipment × 50-75% of OLV) − reserves.

Worked example: $20M revenue distributor with $5M eligible AR, $1.5M finished goods, $800K raw materials, $2M equipment OLV. Borrowing base = ($5M × 82%) + ($1.5M × 55%) + ($800K × 45%) + ($2M × 60%) − 10% reserves = $4.1M + $825K + $360K + $1.2M − $649K = $5.84M net borrowing base. If the requested facility commitment is $8M, borrowing base BINDS at $5.84M, that's the actual usable facility.

Field exam validates the borrowing-base certificate annually. Dilution + concentration + chargeback rates monitored monthly. Failed field exam = borrowing-base reduction or covenant default.

Need an ABL facility?

PeerSense pre-screens UCC senior filings, AR ineligibles, inventory classification, and equipment OLV before bank/specialty ABL submission. Pre-cleared files close 14-28 days faster.

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