BVX Knowledge Base
BVX Knowledge Base
M&A University

Revolver: % of A/R

See Financing for general explanation.

A/R financing is generally a revolving line of credit facility that requires only the interest payments on the borrowed amount and no principal payments. Cash flow of the business improves because there are no principal payments. Hence, this is a preferred form of financing over term debt that requires principal payments.

Banks typically finance receivables if the business has accurate records, and if adequate systems and controls are in place to track receivables. The Advance Rate on A/R and the cost of such borrowing depend on many factors including the type of industry, the customers, the aging of A/R, general economy, etc.

•    Revolving line of credit against A/R is often not available for small businesses.
•    Enter % Advance Rate on the A/R amount entered in Accounts Receivables (A/R) and the % interest cost on this financing. Do not type the % symbol.
•    BVX calculates the amount of A/R borrowing by multiplying % Advance Rate with the A/R amount entered in Accounts Receivables (A/R).
•    BVX maximizes revolver borrowing if it will help maximize the Enterprise Value.
•    BVX uses A/R financing only if it is needed (see Borrowing Priorities). It borrows against A/R before borrowing from other sources.
•    If A/R comes down so does the A/R borrowing. However, if A/R goes up BVX borrows only if it is needed and only if Open Revolver Credit Facility is
•    BVX pre-pays A/R borrowing per Pre-payment Sequence.