Much of the business–to-business commerce in this country is conducted on an open account basis, where payment for goods and services is due within 10 to 90 days from the date of the sale transaction.Accordingly, a steady flow of sales generates a pool of accounts receivable that can be used as collateral for a partial credit advance against the balance of the accounts.There’s a better alternative Why go through an invasive approval process just to find out you’re not eligible for a bank loan? We can help you unlock the potential of your accounts receivables, turning them into cash in as little as 24 hours.We believe that small businesses should stray away from bank loans and enjoy self-liquidating financing with predictable cash flow to run their businesses more effectively. Leave us your contact information, schedule a free consultation, or fill out an application here. Don’t forget to connect with us on Facebook, Twitter, Google and Linked In!As individual accounts are collected, proceeds repay the credit line.
As might be expected, the subjective judgment bias swings along a track that emulates the general optimism/ pessimism of lenders.
As illustrated in the adjacent diagram, ABL lenders provide credit at different points in the working capital cycle with advances being paid down with cash receipts.
Among ABL's most attractive attributes is the lack of a set amortization schedule.
Advance rates are quoted in terms of book value amounts but are adjusted based on NOLV conclusions.
For example, if the specific asset is appraised at a value that is 50% of book value and the lender agrees to advance up to 80% of NOLV, the "advance rate" for the asset becomes 40% of book value.