9 Things on Your Balance Sheet a Lender Will Fund, and 4 It Won’t

Oct 6, 2026 · @Smart Business Funding

By Anthony Collin ·

Most owners think of their balance sheet as a report card. Lenders read it as a menu. Every line item has a price, and some aren’t on the menu at all.

Asset-based financing lets you borrow against what the business already owns instead of relying mainly on profits or years in business. The amount you can get depends on two things: which assets qualify, and what percentage of each one a lender will advance.

Here are nine assets lenders will fund, the four they usually won’t, and how to estimate your own borrowing power.

How lenders decide what an asset is worth

Lenders don’t fund an asset at full value. They apply an advance rate, a percentage of the asset’s value, to leave room for collection shortfalls and liquidation costs.

The rule of thumb: the faster an asset can turn into cash, the higher its advance rate. Federal bank examiners are told to expect lower advance rates on illiquid assets than on liquid ones (ABF Journal on the OCC handbook). Receivables come first, inventory second, and equipment and real estate depend on appraisals.

The 9 assets lenders will fund

#	Asset	Typical advance rate	What moves the number
1	Accounts receivable	70%–85%, sometimes higher	Customer credit, invoice age, concentration
2	Finished-goods inventory	Up to about 65% of liquidation value	How fast it sells and to whom
3	Raw materials	Lower than finished goods	How specialized the materials are
4	Machinery and equipment	50%–80% of orderly liquidation value	Age, condition, resale market
5	Vehicles and fleet	Appraisal-based, similar to equipment	Mileage, model year, title status
6	Commercial real estate	65%–75% of appraised value	Location, property type, existing liens
7	Purchase orders	Varies by lender	Strength of the customer placing the order
8	Owned equipment (sale-leaseback)	70%–90% of fair market value	Equipment type and lease terms
9	Future receivables (sold, not pledged)	Based on revenue history	Consistency of monthly sales

Sources: receivables and inventory from ABF Journal on the OCC handbook; equipment from IB Interview Questions; real estate from Crestmont Capital; sale-leaseback from Clearly Acquired. Ranges vary by lender and are not Smart Business Funding terms.

1. Accounts receivable

Unpaid invoices from creditworthy business customers are the most fundable asset you have. The OCC’s handbook cites common advance rates of 70% to 85%, occasionally up to 95% before reserves (ABF Journal). Clean, current invoices from many customers earn the top of the range.

2. Finished-goods inventory

Products ready to ship are fundable, but at a steeper discount. Banks are advised to base inventory advances on liquidation value rather than market value, with advance rates that may reach 65% (ABF Journal).

3. Raw materials

Raw materials count, but finished goods usually earn a higher rate because they are closer to becoming revenue (Legal Clarity). Commodity materials like lumber or steel fare better than custom components.

4. Machinery and equipment

Equipment is appraised at orderly liquidation value, what it would bring in a controlled sale. Lenders typically advance 50% to 75% or more of that figure. If you’re buying new equipment rather than borrowing against what you own, equipment financing is usually the simpler route.

5. Vehicles and fleet

Trucks, vans and trailers with clean titles are treated much like equipment. Newer, widely resold models command better advances than specialized vehicles.

6. Commercial real estate

Owner-occupied buildings can unlock large amounts, with lenders typically advancing 65% to 75% of appraised value (Crestmont Capital). Expect an appraisal and a slower process. We compare property options in detail in Your House or Your Building?

7. Purchase orders

Some non-bank lenders will advance against confirmed purchase orders when the customer is a large, creditworthy business (SFNet). It’s useful when you have a big order and can’t afford the materials to fill it.

8. Equipment you already own, through a sale-leaseback

You sell owned equipment to a funder, lease it back, and keep using it. Advances can reach 70% to 90% of fair market value (Clearly Acquired). You give up ownership, so price the lease carefully.

9. Future receivables, sold rather than pledged

This one works differently. With a merchant cash advance like our Direct Fund Program, you don’t borrow against an asset. You sell a portion of future receivables for a fixed payback set by a factor rate, remitted daily or weekly. It places no lien on real estate or equipment, though it does require a personal guarantee and a UCC-1 filing. It suits businesses with steady sales but few hard assets.

The 4 assets lenders usually won’t fund

1. Receivables past 90 days

Invoices aged past about 90 days from invoice date drop out of the borrowing base. Under cross-aging rules, if a set share of one customer’s invoices, often 25% or 50%, is past due, that customer’s entire balance can be excluded (Ratio).

2. Obsolete, slow-moving or consigned inventory

Stock that won’t sell quickly is treated as non-lendable (ABF Journal). Goods you hold on consignment aren’t yours to pledge, and inventory at a third-party site without a landlord waiver is usually excluded too.

3. Affiliate, foreign and contra receivables

Invoices owed by related companies, foreign customers or customers you also owe money to are commonly ruled ineligible (Ratio). The lender can’t count on collecting them cleanly.

4. Goodwill and other intangibles

Asset-based lenders size credit on liquidation value. Brand value, customer relationships and goodwill matter to a buyer of your business but have no standalone resale value, so they don’t count.

Worked example: estimating your borrowing base

Illustrative Composite Scenario. Hypothetical figures for teaching purposes; not a real client, offer or approval.

A regional food distributor has the following:

Collateral	Gross value	Less ineligible	Eligible	Advance rate	Availability
Receivables	$500,000	$60,000 past 90 days	$440,000	85%	$374,000
Finished inventory	$300,000	,	$300,000	50%	$150,000
Equipment (orderly liquidation value)	$200,000	,	$200,000	75%	$150,000
Total borrowing base					$674,000

The $60,000 of old invoices cost this owner $51,000 of availability. Tightening collections is often the fastest way to raise a borrowing base. We cover that and six other numbers in 7 Numbers an Asset-Based Lender Checks Before Saying Yes.

Before you sign anything

Asset-based lines come with ongoing reporting, field exams and fees that don’t show up in the headline rate. Read 6 Red Flags Hiding in an Asset-Based Lending Term Sheet first. And if you want to know whether your industry is a natural fit, see 8 Industries Where Asset-Based Financing Fits.

Find the right fit for your assets

Compare revolving options on our lines of credit page, see the industries we work with, and learn how our process works. Not sure which assets you can put to work? Talk to our team or start an application. More at smartbusinessfunder.com or 1-866-Re-Smart.

This article is for general education and is not legal, tax or financial advice. Advance rates and eligibility vary by lender, collateral and borrower and are subject to underwriting. The Direct Fund Program is a purchase of future receivables, not a loan. Scenarios labeled Illustrative Composite Scenario are hypothetical.

For every option in one place, see our business funding overview and our business financing guide.