Question

Your question: Subject: Finance Course: Add Everett's Electronics is receiving an ABL loan on its inventory with the following terms: $6MM facility with $2MM funded, 5.6% interest rate, 5 year loan term, a 1% closing fee, a 0.5% unused line fee, a $100,000 per year collateral monitoring fee, and a $6000 per year audit fee. What is the expected annual return to the lender?

Answer 1

Below are the calculations for the expected annual return to the lender.

Total facility (A)	$                6,000,000
Funded (B)	$                2,000,000
Interest rate (C)	5.60%
Term in years (D)	5
Closing Fee (E)	1%
Unused line fee (F)	0.50%
Collateral monitoring fee (G)	$                   100,000
Audit fee (H)	$                        6,000
Interest return on used facility (B)*(C)	$                   112,000
Unused line fee (F)* ((A)-(B))	$                      20,000
Collateral monitoring fee (G)	$                   100,000
Audit fee (H)	$                        6,000
Total return (I)	$                   238,000
Total return % (I)/(A)	3.97%