What Is an Asset-Based Lending Calculator?

An asset-based lending calculator works out how much credit a company can draw against the assets on its balance sheet, and what that facility costs to use. Unlike a term loan, where the lender commits a fixed amount repaid on a schedule, an asset-based facility is a revolver whose limit moves with the collateral. More eligible receivables mean more availability; a large slow-moving customer falling past ninety days means less.

The mechanism is the borrowing base. Each class of collateral is valued on a basis the lender could actually realise in a workout, and then a haircut, called the advance rate, is applied. Receivables are typically the strongest collateral and carry the highest advance rate, inventory the weakest, with machinery, equipment and real estate used to add capacity or secure term debt alongside the revolver.

How It Works

Every pledged asset is entered at gross book or appraised value. Receivables are reduced by the ineligible percentage before any advance is calculated, because the exclusions in a borrowing base certificate, balances over ninety days, foreign accounts, intercompany balances and contra accounts, are applied first. Inventory is taken at cost and equipment at orderly liquidation value, which is deliberately below replacement cost.

Each class is then multiplied by its advance rate, commonly 80 to 90 percent for receivables, 40 to 60 percent for inventory, 50 to 75 percent for equipment and 65 to 75 percent for real estate on a first lien. The results are summed to give gross advances, from which reserves and any letter of credit exposure are deducted. What remains is the borrowing base, and subtracting the amount already drawn gives the availability the company can access.

Cost is assembled in the same way a lender quotes it. Interest runs at the index plus the spread on the amount drawn, a commitment or non-use fee is charged on the undrawn portion, collateral monitoring is billed monthly, and the closing fee is a one-off charge shown over a single year. Dividing the total by the drawn balance gives the effective cost of the money actually in use, which is the figure that matters when availability is only partly used.

Understanding Your Results

The primary card is the amount available to draw, with the borrowing base and the drawn balance underneath. The three statistics beside it give the borrowing base itself, the collateral coverage ratio expressing how many times over the drawn balance is supported by eligible collateral, and the effective annual cost of funds in use. The breakdown table shows each collateral class with its gross value, eligible value, advance rate and the resulting advance, followed by the reserve deduction and the borrowing base total.

Summary Statistics collects the gross and eligible collateral, gross advances, facility size, drawn and undrawn balances, the all-in rate, coverage, interest, commitment fee, monitoring charges, closing fee, total annual cost, effective cost and the cost per dollar drawn. If the effective cost looks far above the quoted spread, the cause is usually low utilisation: the commitment fee and monitoring charges are spread over a smaller drawn balance, so running closer to the borrowing base lowers the cost per dollar.

The index rate is a static default rather than a live quote, because this page fetches no external data. Advance rates, reserve levels and fees vary by lender, industry and collateral quality, so treat the defaults here as typical middle market terms and replace them with the figures in your own term sheet before relying on the result.