Before binding an ABL revolver, which AR lines are ineligible and which get carved back at term sheet?
Before bind, the credit agreement's Eligible Receivable definition—usually negative (ABA)—decides which AR advances. OCC lists common ineligibles: aging/cross-aging, concentration, affiliate, government/AoCA, foreign unless LC/insurance, contra, unbilled. Construction progress billings, retention, and bonding are lender-practice carves (BofA; ABL Advisor). Term-sheet carves also appear as reduced advances, caps, or LC conditions in attributed SEC exhibits.
Last updated: September 17, 2026
Ineligible AR lines and term-sheet carve-backs
Ineligible means the line is out of the borrowing base. A carve-back means the line may still advance at a lower rate, with a reserve, or only with extra collateral (LC/insurance).
| Claim | Listed | URL |
|---|---|---|
| ABA: Eligible Receivables defined in the negative; concentration; affiliates | Many ABL credit agreements define these terms in the negative, listing everything that is not eligible. When dealing with eligible receivables, lenders typically limit the amount of receivables due from one customer (i.e., "concentration" limits) and exclude receivables due from affiliates of the borrower. | ABA Business Law Today: ABL Credit Facilities |
| ABA: international AR capped unless LC or foreign perfection | If the borrower has any international customers, the lender may cap the receivables from those customers unless additional security (for instance, a letter of credit) or steps to perfect in collateral located abroad is provided. | ABA Business Law Today: ABL Credit Facilities |
| ABA: borrowing-base assets typically eligible inventory and eligible receivables | Availability… is driven by the quality and value of the "borrowing base assets," typically eligible inventory and eligible receivables (and sometimes eligible equipment). | ABA Business Law Today: ABL Credit Facilities |
| OCC ABL: past due by three times the terms | Normally, an account is considered ineligible collateral when it is past due by three times the terms, e.g., 90 days for 30-day terms and 21 days for seven-day terms. | OCC Comptroller's Handbook: Asset-Based Lending |
| OCC ABL: common ineligible characteristics | Receivables that exceed concentration limits… Affiliate receivables… Government receivables of the Assignment of Claims Act of 1940… Foreign receivables… often requires a letter of credit or an insurance policy… Contra-accounts… Unbilled accounts receivable. | OCC Comptroller's Handbook: Asset-Based Lending |
| OCC ABL: common advance rates 70–85% of eligible AR | Common advance rates range from 70 percent to 85 percent of eligible accounts receivable. | OCC Comptroller's Handbook: Asset-Based Lending |
| OCC ABL glossary: cross-aging | Cross-aging: The practice of making all of the accounts receivable from a single account party (the obligated party for an account receivable) ineligible to be included in the borrowing base if a specified proportion of the total accounts receivable from that party is delinquent. | OCC Comptroller's Handbook: Asset-Based Lending |
| BofA: construction progress billings / retention / bonding discomfort | in the case of a construction company, lenders may not feel comfortable lending against accounts receivable that could be difficult to collect due to progress billings, retention or the presence of bonding requirements. | Bank of America Business Capital: What Is Asset-Based Lending |
| BofA: current AR aging test | typically, only current receivables (those that are less than 90 days from invoice date or no more than 60 days past due) are considered. | Bank of America Business Capital: What Is Asset-Based Lending |
| ABL Advisor: most WC providers avoid construction progress billings | most working capital providers do not lend to the construction industry because of the nature of accounts receivable activity (i.e. progress billings). | ABL Advisor: To Lend or Not to Lend — Construction Sector |
| SEC d654: 85% eligible AR; Eligible Accounts defs mutually agreed | Borrowing Base… at any time shall equal the sum of (a) 85% of the eligible accounts receivable of the Credit Parties… The definitions of eligible accounts receivable… will be mutually agreed… taking into account the Borrower’s industry and the results of field exams and inventory appraisals. | SEC EDGAR EX-99.(B)(1) d654389dex99b1.htm |
| SEC d449: 90%/85% IG/non-IG; FEMA aged supplemental initially 25% (exhibit-specific) | 90% (for investment grade Eligible Accounts) or 85% (for non-investment grade Eligible Accounts) of the Eligible Accounts… “Applicable Advance Rate” means, initially 25%, which percentage will reduce quarterly… of Eligible Aged FEMA Accounts. | SEC EDGAR EX-99.D.4 d44934dex99d4.htm |
| SEC d496: foreign franchisee AR needs LC; 10% / 17.5% BB caps (this deal) | 85% of the book value of eligible accounts receivable… attributable to foreign franchisees in each case backed by a letter of credit… shall not exceed 10% of the Borrowing Base… domestic and foreign franchisees… shall not exceed 17.5% of the Borrowing Base. | SEC EDGAR EX-99.1 d496103dex991.htm |
| SEC Franchise Group: 85% eligible credit card receivables and eligible accounts | (A) 85% of the amount of eligible credit card receivables and eligible accounts | SEC EDGAR EX-10.1 f10q0320ex10-1_brileyfin.htm |
| 31 U.S.C. §3727: financing-institution assignment mechanics (not ineligibility) | Subsection (b) of this section does not apply to an assignment to a financing institution of money due or to become due under a contract providing for payments totaling at least $1,000 when— (1) the contract does not forbid an assignment… | 31 U.S.C. §3727 (House OLRC) |
Sources: ABA Business Law Today: Asset-Based Lending Credit Facilities, OCC Comptroller's Handbook: Asset-Based Lending, Bank of America Business Capital, ABL Advisor, SEC EX-99.(B)(1) d654389, SEC EX-99.D.4 d44934, SEC EX-99.1 d496103, SEC EX-10.1 Franchise Group, 31 U.S.C. §3727
What is availability in an ABL revolver?
Availability is how much a borrower can draw against the revolver after the borrowing base certificate multiplies eligible AR and inventory by advance rates and subtracts reserves. The Eligible Receivable / Eligible Accounts definition (often negative) decides which AR counts before that math runs.
Key topics
- Progress billings in borrowing base before bind — why lenders exclude construction AR
- Unbilled cost-in-excess vs billings-in-excess at term sheet — percentage-of-completion AR treatment
- Retention bonded contractor AR carve-back — retainage and bonding collection risk
- Government AR and Assignment of Claims before revolver binds — federal contract eligibility
- Foreign AR LC or credit insurance — cross-border AR eligibility
- Contra affiliate AR at term sheet — intercompany exclusions
- Cross-aged concentration as term-sheet carve — overdue invoice limits
- Field exam vs monthly borrowing-base reporting — collateral verification methods
- Dilution reserve vs ineligible — reserve calculation vs exclusion
- Construction AR vs manufacturing AR at bind — industry collateral differences
- Revolver unused-line fee vs availability plant thought it had — commitment fee structures
- Billings-in-excess liability vs unbilled asset — POC accounting balance sheet items
- AR aging buckets in Eligible Receivable definition
- Concentration reserve single-debtor cap — customer diversification requirements
- Cost-plus contract AR vs fixed-price at term sheet — contract type eligibility
- Letters of credit sublimit vs revolver advance — LC availability within ABL facility
- Work-in-process schedule borrowing-base certificate — WIP reporting for construction
- Lien search UCC filing AR priority — perfection and priority at closing
- Borrowing base certificate monthly compliance — ongoing reporting obligations
- Cash dominion lockbox vs availability trigger — springing cash sweep mechanisms
Frequently asked questions
Before binding an ABL revolver, which AR lines are ineligible and which get carved back at term sheet?
Before bind, the credit agreement's Eligible Receivable definition—usually negative (ABA)—decides which AR advances. OCC lists common ineligibles: aging/cross-aging, concentration, affiliate, government/AoCA, foreign unless LC/insurance, contra, unbilled. Construction progress billings, retention, and bonding are lender-practice carves (BofA; ABL Advisor). Term-sheet carves also appear as reduced advances, caps, or LC conditions in attributed SEC exhibits.
What is the difference between ineligible AR and a borrowing base carve-back?
Ineligible AR is excluded entirely from the borrowing base (OCC treats listed characteristics as ineligible collateral). A carve-back keeps the line in the base at a reduced advance, with a reserve, or only with extra collateral—for example SEC d449’s Eligible Aged FEMA Supplemental Amount at an initially 25% Applicable Advance Rate, or SEC d496’s foreign-franchisee AR that advances only when backed by a letter of credit and within that deal’s 10%/17.5% caps.
Which AR lines does the OCC handbook commonly treat as ineligible?
The OCC Asset-Based Lending handbook states that an account is normally ineligible when past due by three times the terms (e.g., 90 days for 30-day terms), and describes cross-aging. It also lists receivables that exceed concentration limits, affiliate receivables, government receivables under the Assignment of Claims Act of 1940, foreign receivables (often requiring a letter of credit or insurance), contra-accounts, and unbilled accounts receivable. Common advance rates are listed as 70 percent to 85 percent of eligible accounts receivable.
How do ABA sources define Eligible Receivables and foreign/affiliate concentration?
ABA Business Law Today states that many ABL credit agreements define Eligible Inventory and Eligible Receivables in the negative, listing everything that is not eligible; lenders typically impose concentration limits on one customer and exclude affiliate receivables. International customer receivables may be capped unless a letter of credit or steps to perfect abroad are provided. Borrowing-base assets are typically eligible inventory and eligible receivables.
Why do construction progress billings, retention, and bonding get carved at term sheet?
Bank of America Business Capital states that for a construction company, lenders may not feel comfortable lending against accounts receivable that could be difficult to collect due to progress billings, retention or the presence of bonding requirements. ABL Advisor states that most working capital providers do not lend to the construction industry because of progress billings. These are lender-practice carves.