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Home Publications Discussion of Selected ABL Lending Policies

Brief Publication Topic 2 Description i.e. Publications written by Mr. Steve Ryan CA

Discussion of Selected ABL Lending Policies, July 2009

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Insured A/R

In the past, insured A/R was normally only obtained for foreign accounts (located outside North America) via government sponsored programs such as EDC.  In the last few years, more and more Canadian and US A/R accounts are being insured through private insurance providers. A current practice in the ABL industry is to provide a 90% advance rate on domestically insured A/R accounts where overall dilution is less than 5%.  In other words, if an account qualifies for an 85% advance rate without A/R insurance, then the account would qualify for a 90% advance rate with credit insurance.  The justification for the increase in A/R advance rates is that the risk associated with the A/R collateral assigned to the bank is mitigated, to some extent, by the A/R insurance.  For foreign accounts, the A/R account would only be eligible if insurance was in place; the advance rate would be 85% assuming dilution of less than 5%.

Last Updated on Tuesday, 01 September 2009 17:02


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