What the examiner actually samples
The examiner pulls invoices and asks for proof the receivable is real, not aged past the eligibility bucket, not an affiliate, and not a disputed progress bill. Then the examiner counts inventory by class: raw, WIP, finished, hold, consignment, and customer-owned tooling. Dilution — credits, returns, warranty — moves the reserve. Hide the aged AR schedule and the reserve grows.
If you are buying a manufacturing business on ABL, schedule the opening exam in the same week as the physical count when you can. The QoE team will test revenue cut-off. If those two rooms disagree about when a job became a receivable, the credit memo will believe the worse story.
Market-practice advance-rate bands on the owner page are labeled as such: often 70–85% of eligible AR and 40–60% of eligible inventory, lower on WIP. They are not quotes. Confirm with the institution that will sign.
How the exam differs from the peg
The peg defines target net working capital for purchase-price true-up. The exam defines eligible assets for availability after close. Using the peg average as opening availability is how month-two liquidity dies. Using the opening base as the peg is how you fight the seller about items the purchase agreement never defined.
| Diligence room | What it tests | What it does not set | Who staffs it |
|---|---|---|---|
| Field exam | Eligible AR, inventory classes, ineligibles | Purchase price | ABL examiner |
| Quality of earnings | Recast, cut-off, add-backs | Borrowing base | QoE firm |
| Working-capital peg | Target NWC at close | Monthly availability | Both counsel |
| M&E appraisal | FMV / OLV / FLV | Inventory eligibility | Appraiser |
Who sees an exam and who does not
Main Street manufacturing in the BizBuySell 2021–2025 set cleared at a 2.75x median SDE (Source: Iconic / BizBuySell). Many of those shops never see a field exam. Files above the published $5 million 7(a) box (Source: SBA) often do. IBBA Pulse Q1 2026 put 83% of deals over $5 million at three or more offers (Source: IBBA). Competition does not thicken thin AR.
Census CBP 2023 counted 284,452 establishments (Source: Census CBP). Most never need a sponsored revolver. Any shop with WIP can still fail a naive base. ABL for manufacturers is the product FAQ. This page stays on the exam.
What a first-time operator should ask on day one
Ask which invoices were selected, which inventory classes were counted, and which ineligibles were added that the CIM never named. Write the answers down. Those answers become the opening certificate. Arguing later that “the CIM said $2.4 million” is not an argument. The exam is the argument.
After close, expect weekly or monthly borrowing-base certificates and periodic exams. Recasting the controller out of the go-forward model is how the first certificate is late. The FAQ index owns the question. The owner URL owns the base math.
How should opening liquidity be modeled after the exam, not before it?
A term-sheet availability number is a borrowing-base estimate, not Monday cash. Reduce it for a light cage at the peg, for ineligibles the first exam has not listed yet, for a thin-month reserve, and for the first payroll plus a materials buy. The leftover is opening liquidity. A negative leftover is an equity gap. Adjectives will not fill it.
A large estimated base can still sit under a smaller line cap. Read the cap, the inventory and AR sublimits, and when dominion springs. Dominion is collection control, not a slight. Dilution is why it exists. A customer that grows from 28% to 36% after close can throw surplus AR out of the eligible bucket. That is a certificate problem, not a multiple debate.
If the ERP cannot produce eligible AR and classed inventory, budget a workaround before close. Recasting the controller out of the go-forward model is how the first certificate is late and the first default is technical.
Ask whether dilution was computed from credits and warranty or guessed. A guessed reserve will move. A computed reserve can be managed. Bring the credit-memo history. Hide it and the reserve grows. Weekly or monthly certificates sit between exams. Covenant packages may include minimum availability, not only DSCR. Operators who have never issued a certificate will need a controller who can.
The FAQ index owns the question. The owner URL owns the base math and the eligibility exhibit.
Keep the examiner and the QoE team on the same calendar for different reasons than the owner page lists. The exam is building a borrowing base. The QoE is testing whether revenue and cut-off survive a buyer’s model. When those rooms pick different invoice dates, write the conflict in the first credit memo instead of discovering it at the peg fight. An ugly aging still belongs in the first binder; a missing aging is how the reserve arrives as a surprise.
Jason Taken is a business broker. He does not set advance rates. Educational information only. Confirm the exam scope with the ABL lender. After you read the owner URL, book a confidential intro call if the file is real.