Asset-based revolving facility
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A revolving line of funding whose limit rises and falls with the value of your unpaid invoices and your stock.
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01 · In plain words
Your funding limit moves with the value of what your customers owe you and the stock you hold
An asset-based revolving facility is a line of funding from a bank or other finance provider. You can draw money, pay it back, and draw again. The facility is secured on two kinds of business assets: your receivables, which are the unpaid invoices your customers owe you, and your stock, also called inventory (US International Trade Administration).
The amount you can draw changes over time. It is a percentage of the receivables and stock that qualify (Texas Department of Banking). This percentage is called the advance rate. For example, an 80% advance rate on $100 of invoices lets you draw $80. Add the two results together and you have your funding limit, also called the available amount. When your invoices and stock grow, the limit grows. When they shrink, the limit shrinks.
The finance provider counts only part of the value. The part it does not count is a , a cushion in case values fall (Global Supply Chain Finance Forum). Some assets do not count at all. For example, invoices more than 90 days old can be left out (NCUA sample certificate).
The US International Trade Administration says revolving lines of credit are the most common form of (US ITA).
Who is involved
- Your business, the client, pledges its receivables and stock and reports their value regularly.
- The finance provider, a bank or lender, sets the advance rates and decides which assets qualify.
- An outside auditor checks your stock and customer accounts for the finance provider (Texas Department of Banking).
- Your customers owe the invoices. Where a is used, they pay into it.
- A guarantor can support the facility. In the US, offers a for small business exporters (EXIM).
02 · How it works
Nine steps take the facility from signing to each new round of funding
Figure 1 · Interactive
An asset-based revolving facility, step by step
Read down the steps. The last step starts the next round.
Sources: Texas Department of Banking, Loan Worksheet #1, Asset Based Lending, June 2000; NCUA Examiner's Guide, sample certificate; US ITA, Trade Finance Guide, July 2022.
03 · What it means for you
The limit follows your sales and stock, and in return you report often and let the provider check
Figure 2 · Interactive
What an asset-based revolving facility means for each side
Choose your side of the trade.
04 · Worked example
With $1 million of invoices and $800,000 of stock, the funding limit works out at $980,000
This example uses round, made-up numbers. The business is owed $1,000,000. Of that, $100,000 is more than 90 days old and $50,000 does not qualify for other reasons, so $850,000 counts. It holds $800,000 of stock, of which $600,000 counts. The top limit of the facility is $1,500,000, and $900,000 is already drawn.
Figure 3 · Illustrative
Funding limit on a facility with a $1,500,000 top limit
Illustrative inputs. The amount still available is highlighted.
Made-up inputs, worked out by our checking script. Real advance rates and rules differ by provider and business.
05 · When to use it
It suits businesses whose invoices and stock turn over and who can report on them often
Good fit when
- Your receivables and stock turn over again and again, so the funds can revolve (US ITA).
- You can send regular reports, an aged list of invoices, and give access for audits (Texas Department of Banking).
- You export from the US and want more funding against foreign invoices and export stock. An EXIM guarantee can expand the amount available (EXIM).
Another tool may suit better when
- Many of your invoices are more than 90 days old, so they would not count. Look at factoring or invoice discounting.
- Most of your stock is unfinished, which can get a lower rate or be left out. Look at inventory finance or pre-export finance.
- You cannot support lockbox controls, audits and regular reports. A trade loan tied to one deal may suit better.
06 · Rules and a real case
Your agreements set the rules, and US bank examiners check how the limit is worked out
No ICC rulebook applies to this facility. The facility agreement and the security agreement set the terms of this facility (Texas Department of Banking). In the United States, security over receivables and stock follows Article 9 of the Uniform Commercial Code, as each state has enacted it. US bank examiners say that where receivables secure this kind of facility, a current aging report and a review of the advance rate are usually necessary (Federal Reserve, Commercial Bank Examination Manual, February 2026).
A real example. The US National Credit Union Administration, or NCUA, publishes a sample certificate in its Examiner's Guide. It caps the advance rate on receivables at 80% and on stock at 50%, and takes out invoices over 90 days old. In the sample, the amount drawn is $2,000,000 but the available amount is only $1,912,500. So the business must pay back $87,500 (NCUA Examiner's Guide, sample certificate).
Summary
An asset-based revolving facility turns your invoices and stock into funding you can draw and repay
You draw up to a funding limit set by the value of your receivables and stock that qualify. As they grow, the limit grows. In return, you report often, accept audits and controls on customer payments, and repay any gap when values fall.
Related guides: Inventory finance; Receivables finance; Working capital and trade finance. Related cards: Inventory finance; Factoring; Warehouse finance. Every term is in the Trade Finance Glossary.
Sources
- Texas Department of Banking, Loan Worksheet #1, Asset Based Lending (examination procedures), June 2000. Supports: advances as a percentage of eligible assets, lockbox controls, outside audits, aged receivables list, lower rate for unfinished stock
- National Credit Union Administration, Examiner's Guide: sample certificate (PDF), undated. Supports: the 80% and 50% caps, invoices over 90 days taken out, the real example
- Board of Governors of the Federal Reserve System, Commercial Bank Examination Manual, Section 2000 (Assets), February 2026. Supports: aging report and advance rate review
- US International Trade Administration, Trade Finance Guide: A Quick Reference for US Exporters (2022 edition), Chapter 8, July 2022. Supports: security over receivables and stock, revolving lines as the most common form, advance rates on foreign receivables
- Export-Import Bank of the United States, Working Capital Loan Guarantee, undated. Supports: more funding against the same assets for small business exporters
- Global Supply Chain Finance Forum, Standard Definitions for Techniques of Supply Chain Finance: Loan or Advance against Inventory, 2016. Supports: advancing a percentage of value as a margin of protection
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