In Asset-Based Lending (ABL), Advance Requests are how borrowers draw funds from a credit facility. Each request increases the Lender’s amount, which must be fully backed by collateral.

For Financial Institutions doing Asset-Based Lending deals, the Borrowing Base can include cash accounts, hedge positions and eligible receivables. These become the total collateral, which is then compared to the Lender's Amount received, after it is discounted by an Advance Rate. The Advance Rate dictates how much of the Borrowing Base the Lender will contribute with the funds they provided and the borrower will cover the remaining portion.

For example, if a borrower seeks a $100 advance and the Advance Rate is 80%, then:

• The lender provides $100 (80%)

• The borrower contributes $25 (20%) either in cash or in additional pledged loans

• The total Borrowing Base needs to increase by $125, even though the Lender only provided $100 in funds  

There are two ways to support this Borrowing Base increase:

1. Post-Funding – by pledging loans previously disbursed and owned by the borrower to the credit facility.

2. Pre-Funding – by increasing the cash in the pre-funding accounts considered in the Borrowing Base even before loans are issued, and then disbursing new loans using that capital.

Let’s break down the key differences using Cascade’s Advance Request framework.

Post-Funding Advance Requests

In a post-funding structure, the borrower has already disbursed loans in their portfolio which they will then pledge to the facility. These pledged loans (typically eligible receivables) are included in the Borrowing Base. The Borrower needs to identify the loans that they want to pledge, and Cascade will review the contract’s eligibility criteria and add the pledged loans to the Borrowing Base if eligible.  

In the example shown for an Advance Request of $100:

• Discounted eligible receivables increase from $125 to $250

• Cash accounts remain unchanged at $0

• The result of the two lines above increases the Borrowing Base value from $125 to $250

• The result is multiplied by the Advance Rate of 80% increasing the Borrowing Base value from $100 to $200

• The lender’s amount increases to from $100 to $200

• There is no deficiency

Note: Ownership transfer happens after loans are created. The collateral backing the Advance Request is in receivables.

Pre-Funding Advance Requests

In a pre-funding structure, funds from the lender and borrower are deposited upfront into a prefunding account. The borrower then disburses new loans using these funds, and all loans issued are automatically considered owned by the lender.

Using the same numbers, if this was a Pre-Funding Advance Request:

• Discounted eligible receivables remain unchanged at $125

• Cash accounts are increased from $0 to $100 from the Lender and $25 from the Borrower

• The result of the two lines above increases the Borrowing Base value from $125 to $250

• The result is multiplied by the Advance Rate of 80% increasing the Borrowing Base value from $100 to $200

• The lender’s amount increases to from $100 to $200

• There is no deficiency

Note: Ownership transfer happens before loans are created. The prefunding account balance represents the collateral used to originate new loans.

What Happens in Cascade?

At Cascade, Advance Requests work the same operationally in the Advance Request Center, regardless of the pre- or post-funding structure, giving lenders flexibility based on collateral position and loan disbursement timing. The only difference is where the funds are deposited:

• If the borrower already has enough loans to cover the collateral, they need to pledge them, and the funds must be sent to an account outside the Borrowing Base scope, usually a Funding Account.  

• If there isn’t enough collateral to pledge, the funds need to be deposited into the account that’s included in the Borrowing Base, usually called a Pre-Funding Account.  

Key Differences at a Glance

Both approaches are fully supported in Cascade, giving lenders flexibility based on collateral position and loan disbursement timing.

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