Most founders shop asset-based lending the way they'd shop a credit card: find the lowest rate, sign, move on. That instinct makes sense, but it’s also an expensive blind spot. Two ABL facilities can carry the identical advertised rate, finance the same receivables, and offer the same advance rates, yet still cost meaningfully different amounts by year-end. 

The gap isn't in the rate. It's in the fine print many people don’t read: how many days pass between when your customer pays and when that payment is applied to your principal outstanding by your lender.  There's no line item for it. It's buried in how your agreement defines “collections” or “float days,“ which is exactly why most founders paying for it don’t know the true cost to them.

It’s called Collection Float, and it can cost you a hefty sum per year. Here's what it actually costs, and how to find it in your own agreement before it finds you.

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What is Collection Float?

Collection Float: The time between when a payment is received by your lender and when that payment reduces your outstanding loan balance. During that period, interest will continue accruing even though the funds have already been received.

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Lenders justify this delay as an “operational necessity”: payments must settle, clear, and be manually matched to outstanding invoices before they are officially credited. In practice, this means your borrowing balance stays artificially high for a few extra days even though the cash has already swept to your lender’s bank account. Because interest is calculated daily against the principal balance, you continue paying for capital your company has technically repaid.

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The Economics of Float: A Real-World Scenario

To understand the impact, let's look at a typical mid-market food and beverage brand utilizing a $5,000,000 credit line.

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Outstanding Drawn Balance: $3,000,000

Annual Interest Rate: 12%

Daily Cost of Capital: $3,000,000 × 12% ÷ 365 = $986.30 per day

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On Monday morning, a major retail customer initiates a $1,000,000 ACH payment into the facility. Here is how a standard three-day processing delay plays out on your ledger:

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The Net Result

Even though your capital was recovered on Monday, your balance remained at $3 million through Wednesday. That single, standard delay cost your brand $986 in extra interest per day on only one payment.

In isolation, $986 feels negligible. But emerging CPG brands do not operate on a single-payment cadence. Across dozens of distributors, multiple retail accounts, and a continuous monthly collection cycle, this structural delay quietly adds up to tens of thousands of dollars in interest expenses per year.

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Calculate Your Brand’s "Float Tax"

Use our float calculator below to estimate:

• Annual cost of float delays
• Impact on your true borrowing cost
• Implied APR difference

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How to use this tool:‍

• Switch between Borrower View and Lender View
• Your annual collections that are swept/directed to the lockbox
• Your average loan balance
• Input your facility rate (Prime + spread)
• Input the number of float days as per your lender agreement

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The Infrastructure Behind Collection Float: The Lockbox

To implement float, many lenders require full cash dominion or a lockbox structure. Under this setup, customer payments are either sent directly to a lender-controlled account or to your account and swept to the lender’s daily.

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This creates two practical effects:

1. Reduced payment visibility and control

Retailers and distributors often have to work through the lender's operations team for issues like short pays, deductions, or timing discrepancies, which can slow resolution compared with internal AR teams.

2. Cash timing friction

Even after funds are received, they may remain in the lender's system until they are applied to reduce your balance. That creates a gap between cash collection and usable liquidity.

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Why This Never Shows Up on a Statement

Float isn't a fee, so it doesn't get disclosed like one. It's a function of how your credit agreement defines the moment a payment counts.

Most agreements don't say “we hold your cash for three days.” They say something more like: collections are applied upon confirmation of good funds, or availability is adjusted following reconciliation. Language like that sounds procedural. It isn't neutral; it's the clause that decides how long your balance and your interest stay inflated after you've already been paid.

This isn't necessarily bad faith on the lender's part. Many ABL structures are built around lockbox infrastructure and manual reconciliation that genuinely takes a few days to process. The float wasn't designed as a profit center; it's a byproduct of operational plumbing that hasn't been modernized. But intent doesn't change the math. Whether it's structural or strategic, you're the one carrying the cost.

The Result: your facility's advertised rate and your facility's effective rate are two different numbers. An all-in cost of 12.00% on the facility with a 3-day float on active payment volume isn't 12.00%; it's closer to 12.50%-13.50%, depending on your collection cadence, revenue, and balance outstanding.

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What to Look for in a Modern CPG Lender

Float structures vary widely across lenders. Traditional working capital facilities often rely on lockbox-based cash control, while some newer structures reduce or modify these delays.

When evaluating lenders, focus on:

• Reduced or no lockbox requirements where possible
• Springing Dominion vs. Full Cash Dominion with no float days
• Faster application of customer payments to your balance
• Transparent fee structures without timing-based costs

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Three Questions Every CPG Founder Should Ask Before Signing

1. Does this facility require a lockbox or full cash dominion over customer payments?
2. How long does it take for incoming payments to be applied to the outstanding balance?
3. Are there additional fees tied to cash management, utilization, annual renewals, etc.?

If a lender can’t clearly answer these, that uncertainty is in itself meaningful. In today's environment, every dollar of financing cost matters; brands can't afford ambiguity eating into their margins.

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Learn more about the mid-market funding trap for lower middle-market CPG brands.