Do progress billings count toward the borrowing base before an ABL revolver binds?
Last updated: August 27, 2026
What are progress billings?
Progress billings are invoices issued by contractors based on the percentage of work completed on a construction project. Unlike traditional invoices for goods delivered or services performed, progress billings represent work that may not yet be fully inspected, accepted, or paid by the project owner. The contractor bills monthly based on completion milestones, but collection depends on the owner's agreement that the work meets contract specifications.
Why do ABL lenders exclude progress billings from borrowing base?
Bank of America Business Capital explains that "in the case of a construction company, lenders may not feel comfortable lending against accounts receivable that could be difficult to collect due to progress billings, retention or the presence of bonding requirements." The key risk is that if the contractor does not complete the project or the work is defective, the owner may withhold payment or offset the progress billing against the contractor's other obligations.
Collection risk factors
- Project completion: Payment depends on finishing the work correctly and on schedule.
- Owner approval: The project owner must agree that work performed matches the billing percentage.
- Inspection requirements: Many contracts require third-party inspection before progress payments are released.
- Lien and offset rights: Subcontractors or suppliers unpaid by the contractor may assert lien rights, causing the owner to withhold payment.
Do any lenders advance against progress billings?
Specialist construction lenders with deep industry expertise may include progress billings in the borrowing base at reduced advance rates. These lenders maintain rigorous oversight of work-in-process schedules, payroll, and project costing. They typically require detailed monthly WIP (work-in-process) reporting and may conduct more frequent field exams than generalist ABL providers. However, most generalist lenders exclude progress billings entirely from the Eligible Receivable definition at term sheet.
| AR type | Typical advance rate | Why the rate differs |
|---|---|---|
| Standard invoiced AR (completed work) | 70%–85% (OCC: "70 percent to 85 percent of eligible accounts receivable") | Goods delivered or services completed. |
| Progress billings (work in process) | Excluded by most lenders | Collection depends on project completion. ABL Advisor: "most working capital providers do not lend to the construction industry because of the nature of accounts receivable activity (i.e. progress billings)." |
| Progress billings (specialist construction lender) | Lower advance rate (if included at all) | Requires monthly WIP reporting, field exam, and oversight of project costs and payroll. |
Sources: Bank of America Business Capital, ABL Advisor
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Frequently asked questions
Do progress billings count toward the borrowing base before an ABL revolver binds?
Progress billings are often excluded from the Eligible Receivable definition because collection depends on project completion. ABL Advisor states that "most working capital providers do not lend to the construction industry because of the nature of accounts receivable activity (i.e. progress billings)." Bank of America Business Capital notes that construction company lenders may not feel comfortable lending against accounts receivable that could be difficult to collect due to progress billings, retention or bonding requirements.
Why are progress billings considered ineligible collateral in ABL facilities?
Progress billings represent work completed but not yet fully inspected, accepted, or invoiced under standard payment terms. If a construction project is not completed or is completed incorrectly, the contractor may not be paid. This collection uncertainty makes progress billings unsuitable as borrowing base collateral for most ABL lenders.
Can any ABL lenders advance against progress billings?
Specialist construction lenders with rigorous oversight of work-in-process, payroll, and project costing may include progress billings in the borrowing base at discounted advance rates. However, generalist ABL providers typically exclude them entirely from the Eligible Receivable definition at term sheet.