🏦 What Business Owners and CEOs Should Know Before Applying for an ABL Loan
Every business owner reaches a moment when growth requires capital.
Whether it’s scaling fast, preparing for a major contract, or navigating seasonal demand, asset-based lending (ABL) can unlock working capital tied up in receivables and inventory.
But here’s the reality: lenders aren’t just lending against your assets — they’re lending against your financial structure. The difference between a quick approval and a painful, drawn-out process comes down to how clean and organized your books are when they walk in.
What Lenders Actually Look At
When a lender reviews your business, they don’t just read your balance sheet. They want to understand the quality and reliability behind it.
Typical focus areas include:
The age and quality of accounts receivable.
How inventory is valued and controlled.
Intercompany loans and affiliate transactions.
Chart of accounts structure across entities.
Whether your books are on GAAP accrual, not cash basis.
A lender’s trust in your numbers determines how much you can borrow, how fast you close, and how many strings are attached.
Why Cleanup and Structure Come First
The biggest mistake CEOs make is applying for an ABL loan before preparing their books.
Once a lender begins due diligence, they expect answers — not “we’re working on it.”
Smart preparation means tackling the cleanup first: completing reconciliations, aligning your chart of accounts, documenting intercompany activity, and organizing support schedules. This is also when many finance teams create an Audit Drive (a centralized documentation hub) and a CFO Drive (a strategic financial planning layer) so that everything a lender or auditor might ask for is already in place.
A lender who sees well-prepared, accessible records moves faster — and usually offers better terms.
Standardizing the Chart of Accounts
If your company has multiple entities, a messy or inconsistent chart of accounts can derail your entire close and consolidation timeline.
When each entity uses its own naming conventions or account structure, consolidating financials becomes a manual puzzle — and every inconsistency creates noise in your reporting.
Standardizing the COA across all entities is one of the most valuable steps you can take early in the cleanup process. A well-structured, GAAP-aligned COA with clear numbering makes the difference between spending hours reconciling or closing on time.
For example:
1000–1999: Assets (Cash, A/R, Intercompany Receivables, Prepaids)
2000–2999: Liabilities (A/P, Intercompany Payables, Accrued Expenses)
3000–3999: Equity accounts
4000–4999: Revenue
5000–5999: COGS and direct costs
6000–7999: Operating expenses and SG&A
For intercompany transactions, dedicated numbered accounts (e.g., 1205 Intercompany Receivable – Entity A and 2205 Intercompany Payable – Entity B) keep eliminations clean and transparent during consolidation.
This level of structure is especially critical for multi-entity groups, where rollups often span multiple bank accounts, departments, or subsidiaries. A consistent COA lets you:
Eliminate intercompany balances accurately.
Roll up entity financials without endless account mapping.
Pass lender field audits and external audits with less back-and-forth.
Present consolidated reporting that looks professional, stable, and scalable.
Lenders, auditors, and investors see a standardized chart of accounts as a sign of maturity and internal control strength, which directly impacts credibility during ABL loan reviews, due diligence, or potential sale processes.
Intercompany and Affiliate Loans Must Be Clear
Lenders will also scrutinize intercompany loans and affiliate activity because these amounts usually don’t count toward eligible collateral.
Having a clean Intercompany & Affiliate Loan Schedule that shows who owes what, when it originated, and how it’s classified removes uncertainty from your borrowing base calculation.
If your business has affiliate entities outside of the consolidation, document them separately. Transparency here prevents last-minute surprises.
Clean Books = Faster Deals
When your numbers are clean, lenders trust them! When they trust them, your borrowing base is clearer, due diligence is faster, and you stay in control of the negotiation.
In contrast, when things are disorganized, deals slow down. Collateral gets discounted. Timelines stretch. Costs increase.
Why CEO Involvement Matters
Lenders notice when CEOs are engaged in the financing process. A leadership team that understands its financial structure signals strength, not risk.
When CEOs work hand-in-hand with their controller or CFO early on, issues are escalated and resolved quickly, not discovered at the eleventh hour.
👉 Final Thoughts
An ABL loan isn’t just a financing tool. It’s a stress test of your financial house. Start your cleanup before you apply. Standardize your structure. Document intercompany activity. Build trust through clarity.
By the time the lender walks in, you won’t be defending your numbers — you’ll be leading the conversation.
📌 Services & Disclaimer
This content is for informational purposes only and should not be considered legal, tax, or accounting advice. Please consult with a qualified professional regarding your specific situation. Acrux Advisory is not a CPA firm and does not provide services requiring a public accountancy license.