Glossary

Also referred to as an invoice test, a ship test is performed as part of an ABL Field Exam. The ship test compares the invoice date to either the Bill of Lading date or the delivery date, depending on the FOB terms of the transaction.

Short for “Inventory Shrinkage.” This term describes the loss of inventory during a production process, or any loss incurred between receiving the manufactured goods from an inventory vendor and selling them to the end buyer.

SKU’s that have not shipped in a certain amount of time and have very low inventory turnover ratios (or high inventory days).

Usually depicted as a table summarizing the breakdown of all sources of funds that are available and use of funds to effectuate the closing of a transaction. Sources can include availability generated from the revolving line of credit, proceeds from a term loan, proceeds from other debt and\or equity, and cash.

A Split Collateral Deal is a transaction where two lenders are providing secured financing to a company where one lender has a 1st priority security interest in certain assets and the other lender has a 1st security interest in another pool of assets.

A Sponsor is typically a private equity investment firm, typically a private equity firm that engages in leverage buyout transactions. In addition to bringing capital to a deal, financial sponsors are expected to bring a combination of capital markets expertise, various important contacts, strategies for operational improvement, and the experience of owning leveraged companies.

Under normal circumstances, the Borrower maintains control of their own lockbox and all cash receipts (where they have the option to transfer cash into their Operating Account or can choose to pay down the Line of Credit). 

A financial covenant or series of covenants that are tested if certain events or thresholds are “triggered", such as falling below a minimum excess availability amount.