Asset-based revolving credit line: Unlocking the Cash Sitting on Their Shelves
Oct 13, 2026 · @Smart Business Funding
How a regional grocery group used its receivables and inventory to buy a fifth store, without an equity partner.
| At a glance | |
|---|---|
| Business | Regional independent supermarket group |
| Size | 4 locations, about $45M annual sales, in-store pharmacies at 2 stores, a catering and wholesale division |
| Years in business | 30+ (second-generation ownership) |
| Product | Asset-based revolving credit line |
| Borrowing capacity | about $2.2M, up from a $500K bank line |
| Use of funds | Buying and opening a fifth store from a retiring grocer, plus ongoing working capital |
The challenge
A retiring grocer in a neighboring town offered to sell his store to the group. The location was strong, the customers were loyal, and the price was fair. The owners estimated they needed about $600,000 for inventory, fixture upgrades, and working capital to take it over and reopen under their name.
On paper, the business had plenty of value:
- Pharmacy receivables from insurance companies and benefit managers, which reliably pay on 30–45 day cycles
- Catering and wholesale invoices from local businesses, schools, and institutions
- Several million dollars of inventory across four stores
But their existing bank line was only $500,000, and it came with strict financial ratio requirements. The acquisition would temporarily push them outside those ratios, and the bank wasn’t willing to stretch.
The alternative was bringing in an equity partner and giving up part of a business the family had built over three decades. They didn’t want to do that.
The solution
Smart Business Funding structured an asset-based revolving credit line. Instead of focusing mainly on last year’s profit and financial ratios, it lends against what the business owns: its receivables and its inventory.
The credit line works like this:
- The borrowing base is calculated from eligible receivables and inventory, each at an agreed percentage (the “advance rate”).
- The business draws what it needs, up to the borrowing base.
- As customers and insurers pay, the balance goes down and the money is available to draw again.
- The borrowing base is updated regularly, so capacity grows as the business grows.
The borrowing base
Illustrative figures. Actual advance rates and eligibility depend on the lender, the collateral, and an audit of the business.
| Collateral | Value | Eligible portion | Advance rate | Borrowing capacity |
|---|---|---|---|---|
| Pharmacy receivables (insurers and benefit managers) | $1,000,000 | $1,000,000 | 85% | $850,000 |
| Catering and wholesale invoices | $400,000 | $350,000 | 80% | $280,000 |
| Shelf-stable inventory | $2,200,000 | $2,200,000 | 50% | $1,100,000 |
| Perishable inventory (produce, dairy, meat) | $1,400,000 | $0 | — | $0 |
| Total | about $2,230,000 |
A few things to note:
- Perishables were excluded. Lenders typically don’t lend against inventory that may spoil before it can be sold.
- Older invoices were excluded. Catering invoices past 90 days don’t count toward the borrowing base.
- Capacity went from $500,000 to about $2.2 million, using assets the business already owned.
The group drew $600,000 for the acquisition and kept more than $1.6 million of capacity available for seasonal inventory and day-to-day needs.
The results
- Fifth store acquired and reopened under the group’s name. [Insert the real timeline from client data.]
- No equity given up. The family kept 100% ownership.
- About 4x the borrowing capacity of their old bank line, using assets they already had.
- Room to keep growing. As the new store adds receivables and inventory, the borrowing base grows with it.
- Combined revenue up after the acquisition. [Insert the real figure from client data.]
“[Client quote: one or two sentences in the owner’s own words about the acquisition opportunity and keeping the business in the family. Collect with written permission.]” — [Owner name, company name, city]
Why asset-based financing was the right fit
- The value was in the assets, not the ratios. A strong balance sheet can support far more borrowing than a profit-based bank formula allows, especially during a growth move like an acquisition.
- Pharmacy receivables are strong collateral. Insurance companies and benefit managers pay reliably, which makes those receivables valuable to a lender.
- It’s a revolving line, not a one-time loan. The group can borrow, repay, and borrow again as needs change through the year.
- It grows with the business. More stores mean more receivables and inventory, which mean more borrowing capacity.
Who it’s best for: established, multi-location grocers with meaningful receivables (pharmacy, wholesale, catering, or institutional accounts) and substantial inventory, usually with several million dollars or more in annual sales. Asset-based lines involve regular reporting and periodic collateral reviews, so they suit businesses with solid bookkeeping.
Your business may be worth more than your bank thinks
If your bank line feels too small for your next move, whether that’s an acquisition, a new location, or a major inventory buildup, the borrowing power may already be on your balance sheet.
Smart Business Funding helps established grocers and multi-location retailers across the US turn receivables and inventory into flexible working capital.
Find out how much borrowing power is already on your balance sheet. Get a no-obligation estimate →
