The ABL Credit Package: What Lenders Actually Want to See

Your Credit Package Is Your Deal's First Impression — And Often Its Last

A credit analyst at an ABL shop sees dozens of deal submissions every month. Most are incomplete. Many are poorly organized. Some are barely more than a paragraph email and a set of tax returns. Those deals go to the bottom of the pile — or straight to the decline folder.

Then there are the packages that land on the desk ready for committee. Financial statements tied to the borrowing base. Collateral analysis with proper eligibility criteria. Projections that show how the facility performs through a full business cycle. A clear narrative that tells the analyst exactly why this deal makes sense.

That's the difference between a deal that gets funded and a deal that gets ignored.

Donald Clarke literally wrote the book on this. Asset Based Lending Disciplines — the first comprehensive textbook on ABL — was authored by Donald Clarke and has been used to train thousands of lending professionals worldwide. As SFNet's Senior Instructor and Educational Chairman (2020-2022), he's taught credit analysts and underwriters exactly what they need to see in a package to move a deal forward.

At DCE, we build credit packages from the lender's perspective. When one of our packages hits an analyst's desk, it looks like it came from inside the lender's own credit department. Here's exactly what goes into it.

Component 1: Financial Statements

This is the foundation. Without complete, quality financial statements, nothing else matters.

What lenders need:

• Three years of annual financial statements. Audited is best, reviewed is acceptable, compiled is the minimum. Tax returns alone are not sufficient for most ABL lenders — they lack the detail needed for collateral analysis.
• Interim financial statements. Current year-to-date monthly or quarterly financials, including balance sheet, income statement, and statement of cash flows. These must be reasonably recent — anything older than 60 days raises questions.
• Detail schedules. Accounts receivable aging (by invoice date, not due date), inventory detail by category (raw materials, WIP, finished goods), and fixed asset schedules. These tie directly to the borrowing base.

Common mistakes:

Financials that don't tie. The A/R on the balance sheet doesn't match the aging total. The inventory on the books doesn't match the detail report. These discrepancies signal weak accounting infrastructure, and lenders will flag them immediately.

Missing cash flow statements. Many borrowers provide balance sheets and income statements but skip cash flows. Lenders use cash flow analysis to understand how working capital moves through the business and whether the facility will be used for its intended purpose.

Stale numbers. Sending financial statements from eight months ago. The market moves fast. Lenders want to see where the business is now, not where it was last year.

Component 2: The Borrowing Base Certificate

If there's one document that separates a professional ABL submission from an amateur one, it's the borrowing base certificate. This is the heart of the deal.

What it should include:

Total accounts receivable — straight from the aging report, tied to the balance sheet.

Ineligible receivables — itemized by category:

• Past due (typically >90 days from invoice date)
• Cross-aged (accounts where >50% of the balance is past due, making the entire account ineligible)
• Concentration excess (amounts exceeding 15-25% of total A/R from any single debtor)
• Foreign receivables
• Intercompany receivables
• Government receivables (sometimes eligible at different rates)
• Credit balances and contras

Eligible A/R — total A/R minus all ineligibles.

A/R advance rate and availability — typically 80-85% of eligible A/R.

Repeat the same process for inventory:

• Total inventory by category (raw, WIP, finished goods)
• Ineligibles (obsolete, slow-moving, consignment, in-transit)
• Eligible inventory valued at net orderly liquidation value (NOLV) — not book value
• Advance rate applied to NOLV (typically 50-65% for finished goods)

Equipment (if applicable): Net forced liquidation value from a recent appraisal, advance rate (50-80%), and availability.

Total availability — sum of all collateral availability minus reserves (rent, dilution, priority claims).

Net availability — total availability minus current outstandings.

Look at the Deal Spotlight section on our homepage — that's an example of how we present collateral analysis. Eligible A/R of $8.4M, 85% advance rate, $7.14M availability. Eligible inventory of $6.2M, 50% advance rate, $3.10M availability. Total availability: $10.24M. Clean, structured, decision-ready.

Component 3: Collateral Analysis

Beyond the borrowing base math, lenders want qualitative analysis of your collateral. This is where you demonstrate that you understand your own assets.

For receivables:

• Customer concentration analysis. Who are the top 10 debtors? What percentage of total A/R does each represent? What are their credit ratings or payment histories?
• Dilution analysis. What's the historical dilution rate (credits, returns, allowances as a percentage of gross sales)? Trending up or down? Lenders typically want dilution under 5% for clean deals; anything above 8-10% requires explanation and higher reserves.
• Aging analysis. What percentage of A/R is current vs. 30/60/90/120+ days? How does this compare to industry norms and to the borrower's historical performance?
• Collection history. Average days sales outstanding (DSO). Is it stable, improving, or deteriorating?

For inventory:

• Composition breakdown. What percentage is raw materials, WIP, and finished goods? Lenders advance most aggressively on finished goods, least on WIP.
• Turnover analysis. How quickly does inventory move? Slow-turning inventory gets lower advance rates or excluded entirely. Lenders want to see turns by category.
• Obsolescence assessment. What's the company's write-off history? Is there a formal process for identifying and disposing of obsolete inventory?
• Appraisal context. If you have a recent appraisal, include it. If not, provide context about what the inventory would liquidate for and through what channels (auction, orderly sale, scrap).

Component 4: Financial Projections

Lenders don't fund based on projections. They fund based on collateral. But projections tell the lender how the facility will perform over time — and that affects structure, pricing, and approval.

What to include:

• 12-month projected income statement and balance sheet. Monthly detail showing revenue, COGS, operating expenses, EBITDA, and key balance sheet items (A/R, inventory, payables, debt).
• Projected borrowing base. Show how the borrowing base moves month-to-month based on projected receivable and inventory levels. This tells the lender when peak and trough borrowing will occur.
• Projected availability. Total availability minus projected outstandings by month. The lender wants to see that excess availability remains positive throughout the period — and ideally stays above the springing covenant threshold.
• Key assumptions. What drives the projections? Revenue growth rates, margin assumptions, customer payment terms, seasonal patterns. Unrealistic assumptions undermine credibility. Conservative, well-supported assumptions build confidence.

Common mistakes:

Hockey stick projections. Revenue that's flat for 6 months and then doubles in month 7. Lenders have seen thousands of projections and they know what realistic growth looks like. If your projections show dramatic improvement, you need to explain exactly what drives it — a signed contract, a completed acquisition, a seasonal peak with historical support.

No downside scenario. Some lenders want to see a base case and a downside case. The downside case shows that the facility still works — still maintains adequate availability and coverage — even if things don't go according to plan.

Component 5: The Deal Narrative

This is where most submissions fall apart. Borrowers send financials and data without context. They assume the numbers speak for themselves. They don't.

A strong deal narrative covers:

Company overview. What does the company do? How long has it been operating? What's its market position? Keep this to one paragraph — the analyst doesn't need a full marketing pitch.

Capital need. Why does the company need this facility? Be specific. "Working capital" is not a capital need — "seasonal inventory build-up peaking in Q3 requiring $4M in additional availability above the current $8M line" is a capital need.

Use of proceeds. Where exactly does the money go? Paying off existing lender? Funding an acquisition? Building inventory for a new contract? Lenders need to trace the capital from their facility to its destination.

Collateral story. Why should the lender have confidence in this collateral? Strong customer base with investment-grade debtors? Inventory that's readily liquidable through established auction channels? A 10-year history of minimal dilution? Tell the story that supports the borrowing base numbers.

Risk factors and mitigants. Every deal has risks. Acknowledge them and explain what mitigates them. A company with customer concentration addresses it by explaining the long-standing relationship, the debtor's creditworthiness, and the contractual protections in place. Pretending risks don't exist doesn't make them go away — it makes the analyst question your credibility.

Proposed structure. What facility size, advance rates, pricing, and terms are you proposing? This doesn't have to be final — the lender will counter with their own structure. But proposing a reasonable starting point shows you understand the market and sets the negotiation framework.

Putting It All Together

A complete ABL credit package, organized and ready for committee, should include:

1. Deal summary / executive overview (2-3 pages)
2. Deal narrative (2-4 pages)
3. Borrowing base certificate (1-2 pages)
4. Collateral analysis (3-5 pages)
5. Financial projections with projected borrowing base (3-5 pages)
6. Three years of annual financial statements
7. Current interim financials
8. A/R aging and inventory detail
9. Appraisals (if available)
10. Supporting documents (organizational chart, customer list, key contracts)

That's 30-50 pages of structured, organized, decision-ready content. Not a 200-page data dump. Not a two-paragraph email. A focused package that gives the credit analyst everything they need to underwrite the deal and present it to committee with confidence.

Why This Matters More Than You Think

The quality of your credit package directly affects three things:

1. Speed. A complete package moves through underwriting faster because the analyst doesn't need to chase missing documents or clarify ambiguities. We've seen well-packaged deals close in 30 days while poorly packaged deals take 90+.
2. Terms. A professional package gives the lender confidence, which translates to more aggressive advance rates, lower pricing, and fewer reserves. When the lender doesn't have to add cushion for uncertainty, the borrower benefits.
3. Approval rate. Deals that hit committee with a complete, coherent package get approved at significantly higher rates than deals that trickle in over weeks with supplemental requests. First impressions matter, and for most declined deals, the package quality was a factor.

At Don Clarke Enterprises, building credit packages is our core competency. Donald Clarke wrote the textbook that teaches lenders how to evaluate these packages — and we build them to that exact standard. When we send a package to a lender, the analyst's job gets easier. And when the analyst's job is easier, the deal moves faster and the terms get better.

That's how ABL is supposed to work — not as an adversarial process, but as a structured presentation of facts that leads to a clear credit decision.