Advance rate
Asset-Backed Securities glossary · Asset Specific Nuances
Definition
In revolving facilities, the percentage of eligible receivables purchased by the trust or advanced to the seller.
Advance rate in plain English
Imagine a pawnshop that lends you money against your stuff — it won't lend the full value, just a slice, so it's protected if the stuff loses value. The "advance rate" is exactly that slice: when a trust buys a company's IOUs (money customers owe it, called receivables), it only pays a percentage of their face value up front. So $100 of eligible receivables at an 85% advance rate means the seller gets $85. That built-in cushion protects the buyer if some of those IOUs never get paid.
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