ABL lenders are running tighter eligibility tests on inventory while pushing AR advance rates higher — a divergence that reflects sector-specific risk views.
The standard ABL borrowing base is bifurcating in 2026. On the AR side, advance rates have crept up — 88–90% is now standard for investment-grade obligors, vs 85% historically. Lenders are competing on facility size and chasing yield.
On the inventory side, the opposite is happening. Eligibility tests are tighter, slow-moving inventory categories are being excluded, and advance rates on raw materials have dropped 5–10 points.
Distributors and wholesalers are benefiting from the AR liberalization. Manufacturers with significant raw materials and WIP exposure are facing tighter borrowing bases despite improving fundamentals.
Headline advance rates on AR and inventory ABL facilities held flat year-over-year, but borrowing base eligibility tightened — and that's where the real story lives.
Spot factoring volume grew 23% YoY in Q1 as companies favor situational liquidity over standing contract facilities — a structural change in the market.
Average buy rates across A-paper merchants tightened 9 bps month-over-month as risk-on capital rotated back into short-duration revenue-based product.
