Advance Rate
Corporate Credit Analysis glossary · Credit Metrics & Debt Schedule Modeling
Definition
The percentage of book or appraised value that can be realised from an asset in a liquidation. Commonly applied to receivables and inventory in asset-based lending.
Advance Rate in plain English
An advance rate answers a simple question: if we had to sell this asset in a hurry, what fraction of its stated value would we actually collect? Lenders use it because the number on paper is optimistic — customers stall on paying, and warehouse goods rarely fetch full price in a fire sale. So a 70% advance rate on receivables means the lender assumes only $70 of every $100 owed will really come in, and they lend accordingly to protect themselves.
Learn these first
Related Corporate Credit Analysis terms
Corporate Credit Analysis practice questions · Corporate Credit Analysis flashcards · Corporate Credit Analysis study guide