Would you fund a $750,000 revolver draw?
A US packaging maker requests a $750,000 draw on a $6m asset-based revolver. It has $3.5m outstanding. The latest certificate shows $10m of receivables, including $2m of disputed invoices from smaller customers and $4m owed by the largest customer.
The question
Use the fictional agreement as of the draw date. Exclude disputed invoices. Cap each customer at 20% of otherwise eligible receivables before the concentration adjustment. All smaller customers are below the cap. Advance 80% on the adjusted amount and subtract a $0.4m reserve. The draw limit is the lower of the borrowing base and the $6m commitment, less outstanding principal. Assume no other usage.
“Decide whether to fund the draw, then revise when the collateral changes.”
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A strong answer, step by step
Open each step in turn. This is one strong answer, not the only one.
Step 1: Remove disputed invoices
What would you do here? Open the move you’d make.
Start with $8m
The strong move. Calculate eligibility before concentration.
Use the full ledger
Tempting, but it misses something. Disputed invoices are ineligible.
See how a strong candidate says it
“Subtract $2m of disputed invoices from the $10m ledger.”
Why it works: Calculate eligibility before concentration.
Step 2: Apply the customer cap
What would you do here? Open the move you’d make.
Use 20% of gross receivables
Tempting, but it misses something. Gross receivables include disputed invoices.
Limit the largest customer to $1.6m
The strong move. The cap limits how much one customer can support.
See how a strong candidate says it
“20% of $8m is $1.6m. Exclude $2.4m of that customer’s $4m. Adjusted receivables are $5.6m.”
Why it works: The cap limits how much one customer can support.
Step 3: Decide on the draw
What would you do here? Open the move you’d make.
Decline the full draw
The strong move. Availability is $170,000 short.
Fund the full request
Tempting, but it misses something. The commitment is only one limit.
See how a strong candidate says it
“80% of $5.6m less $0.4m gives a $4.08m base. Less $3.5m outstanding leaves $580,000.”
Why it works: Availability is $170,000 short.
Step 4: Recalculate on new collateral
What would you do here? Open the move you’d make.
Add $2m to availability
Tempting, but it misses something. The advance rate and cap still apply.
Recalculate with $2m of new eligible invoices
The strong move. The draw now fits if the lender verifies the updated certificate.
See how a strong candidate says it
“Other customers add $2m and stay below the cap. The pool before the cap is $10m. The largest customer can contribute $2m, leaving $8m of adjusted receivables. The base reaches $6m. Availability is $2.5m.”
Why it works: The draw now fits if the lender verifies the updated certificate.
The answer, in short
- Decision
- Decline the full draw on the first certificate. Consider funding it after the update.
- Because
- Availability increases from $580,000 to $2.5m.
- What would change it
- Verify the new invoices and the updated certificate.
Reset to the first certificate. What if the largest customer’s invoices also become ineligible?
Common traps
- Treating the revolver commitment as available cash.
Check your answer
- I excluded disputed invoices.
- I used the pre-cap denominator.
- I subtracted the reserve and outstanding debt.
- I recalculated when eligible receivables changed.
Last reviewed Nov 10, 2026