Asset based Revolving Line of Credit: Borrowing Base Calculation

Consider the terms of an asset based revolving line of credit as listed below. Normal accounts receivable terms are 30 days net. Compute todays additional amount available to borrow (or payment due). Show work in an excel file

Loan ceiling $800,000

Current balance $640,000

Advance rates:

Eligible receivables: 80%

Eligible Inventory 50%

Eligible Receivables All not more than 30 days past due.

Eligible inventory All raw materials and finished goods. No work-in-process (WIP).

Todays data: Amount

Inventory:

Raw materials $570,000

Work in process 500,000

Finished goods 235,000

Total Inventory $1,305,000

Accounts receivable

Current $400,000

0-30 days past due 180,000

31-60 days past due 90,000

61-90 days past due 80,000

90+ days past due 160,000

Total accounts receivable $910,000