Borrowing Base
The formula a lender uses to determine the maximum amount available under an asset-based facility, calculated by applying advance rates to eligible collateral.
How it is calculated
A borrowing base typically sums advance rates against eligible accounts receivable, eligible inventory, and sometimes eligible equipment or real estate, less reserves for dilution, concentration, and ineligibles.
The output is a maximum availability figure, reset monthly or weekly via a borrowing-base certificate signed by the borrower.
Why it matters
The borrowing base, not the facility's stated commitment, determines how much capital is actually available on any given day. Understanding eligibility rules, concentration limits, and reserves is essential to forecasting liquidity.
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