Eligible Receivables

In an asset-based lending (ABL) facility, the credit limit is not a fixed dollar amount but a formula tied to the value of qualifying collateral. Eligible receivables are the invoices that pass the lender's inclusion tests and form the backbone of that formula—typically 80–85% of eligible A/R plus a percentage of eligible inventory.

Standard eligibility criteria include: - **Age** — invoice is generally 90 days or fewer from invoice date (some lenders use 60 days from due date). - **Concentration limit** — a single debtor typically cannot exceed 20–25% of total eligible A/R to prevent concentration risk. - **Creditworthiness of debtor** — invoices owed by bankrupt, disputed, or government-payment-delayed debtors are excluded. - **Cross-aging rule** — if more than 50% of the total balance owed by a single debtor is past due, all invoices from that debtor become ineligible. - **Foreign receivables** — invoices owed by non-US debtors are often excluded unless covered by trade credit insurance or export guarantees. - **Contra accounts** — invoices where the debtor also sells to the borrower (mutual payables) are excluded or offset.

The SBA's guidance on ABL program eligibility references the Federal Reserve's Commercial Lending Examination Procedures as the baseline for appropriate borrowing-base construction (https://www.sba.gov/document/sop-50-10-lender-development-company-loan-programs). The FDIC's examination manual for asset-based lending further outlines how examiners evaluate borrowing-base certificates and eligibility definitions (https://www.fdic.gov/regulations/examinations/supervisory/insights/siwin04/abltranscript.html).

Borrowers must submit a borrowing-base certificate—typically weekly or monthly—certifying the eligible A/R balance, which controls how much they can draw on the revolving line.