Field Examination

A field examination (field exam) is a scheduled or surprise on-site review that ABL lenders conduct to validate what a borrower reports on its borrowing-base certificate. Because ABL revolvers are self-reported collateral facilities—the borrower certifies eligible A/R and inventory each week—lenders periodically send examiners to confirm that the numbers match reality.

A typical field exam covers: - A/R verification — reconciling the borrower's aging report to the general ledger, testing invoices for legitimacy, confirming debtors exist and balances are accurate. - Inventory count and appraisal — physically counting and appraising finished goods, raw materials, and WIP; identifying obsolete or damaged items. - Dilution analysis — calculating the historic rate of credits, returns, and disputes against gross invoiced amounts, which informs the advance rate. - Internal controls review — evaluating cash application procedures, billing controls, and management reporting. - UCC lien search — confirming no undisclosed liens have attached to the collateral.

Field exams are typically performed at origination (before closing), annually for healthy borrowers, and more frequently (quarterly or on-demand) if the lender identifies deteriorating trends. The OCC's Comptroller's Handbook guidance for ABL portfolios specifies that bank examiners review whether lenders have field exam programs proportionate to facility size and risk (https://www.occ.gov/publications-and-resources/publications/comptrollers-handbook/files/asset-based-lending/pub-ch-asset-based-lending.pdf). The Federal Reserve similarly instructs commercial bank examiners to evaluate the adequacy of ABL monitoring programs, including frequency of field exams (https://www.federalreserve.gov/supervisionreg/topics/credit_risk.htm).

Costs—typically $5,000–$25,000 per exam—are passed to the borrower as a loan expense and should be budgeted annually.

These stakes are not abstract: the Federal Reserve's 2026 Report on Employer Firms found 22% of applicants for a loan, line of credit, or merchant cash advance received none of the financing they sought (https://www.fedsmallbusiness.org/reports/survey/2026/2026-report-on-employer-firms) — the population an ABL lender's collateral-verification rigor, field exams included, is ultimately trying to separate from creditworthy borrowers. The SBA's 7(a) and 504 programs, which rely on different verification standards, still guaranteed 84,400 loans worth $44.8 billion combined in FY2025 (https://legacy.sba.gov/article/2025/09/30/trump-sba-delivers-record-capital-small-businesses-fy25), evidence that rigorous underwriting and real loan volume aren't mutually exclusive.