Accounts Receivable Eligibility Criteria

Summary

This practice note discusses the concept of accounts receivable eligibility criteria in the context of an asset-based lending credit facility and in particular the treatment of different types of receivables for such purpose. Only accounts receivable of a borrower that satisfy the eligibility criteria will be included in the calculation of the borrowing base. Since the borrowing base determines how much a borrower can borrow under an asset-based lending credit facility, the amount of the receivables that satisfy the eligibility criteria will be significant to both the borrower and the lender in understanding how the credit facility will address the working capital needs of a borrower.