Borrowing Base Certificate Example
A borrowing base certificate is the borrower's recurring calculation of eligible collateral and resulting availability. Lenders compare it with financial records, aging reports, inventory data and field-exam findings.
How an ABL borrowing base converts assets into availability
A borrowing base certificate is the borrower's recurring calculation of eligible collateral and resulting availability. Lenders compare it with financial records, aging reports, inventory data and field-exam findings.
Related Financely resources include asset-based lending and borrowing base reports for asset-based lending.
The basic logic is simple, but the detail is contractual. Gross receivables and inventory are filtered through eligibility rules, multiplied by agreed advance rates and then reduced by reserves. The result is borrowing-base availability, which is compared with outstanding loans and the facility limit. The exact treatment should be confirmed against the transaction documents, collateral position and lender terms for this specific financing.
Illustrative borrowing base certificate
| Line item | Illustrative amount |
|---|---|
| Gross accounts receivable | $5,000,000 |
| Less ineligible receivables | ($1,000,000) |
| Eligible receivables | $4,000,000 |
| 85% receivables advance | $3,400,000 |
| Eligible inventory | $2,000,000 |
| 50% inventory advance | $1,000,000 |
| Less reserves | ($300,000) |
| Borrowing base availability | $4,100,000 |
The percentages above are illustrative, not market promises. Actual eligibility, advance rates and reserves are negotiated for the specific borrower and collateral.
Reserves can reduce availability further
Lenders can establish reserves for risks not fully captured by advance rates, including dilution, rent or warehouse claims, taxes, customer concentrations, inventory liquidation costs or other priority claims. The legal documents define when reserves may be imposed and how they affect excess availability. The exact treatment should be confirmed against the transaction documents, collateral position and lender terms for this specific financing.
Reporting and field examination
Borrowing-base lending depends on current information. Borrowers typically provide receivables aging, inventory reports and certificates on an agreed frequency, with more frequent reporting when availability is tight. Field examinations and appraisals test whether those reports reconcile to the underlying systems and collateral. The exact treatment should be confirmed against the transaction documents, collateral position and lender terms for this specific financing.
A simple formula
Borrowing base = eligible receivables × receivables advance rate + eligible inventory × inventory advance rate − reserves.
The facility can then be limited by the overall commitment, sublimits and any minimum excess-availability requirement. For manufacturers, this structure can align debt capacity with the growth of working assets rather than a fixed unsecured line. The exact treatment should be confirmed against the transaction documents, collateral position and lender terms for this specific financing.
FAQ About Borrowing Base Certificate Example
Why can availability be lower than total asset value?
Because ineligible assets are removed, advance rates are less than 100%, reserves may apply and the facility commitment itself can cap drawings. The exact treatment should be confirmed against the transaction documents, collateral position and lender terms for this specific financing.
How often is a borrowing base reported?
Frequency varies by facility and liquidity profile. Monthly reporting is common, with weekly or more frequent reporting possible when availability is tight. The exact treatment should be confirmed against the transaction documents, collateral position and lender terms for this specific financing.
Can advance rates change?
Yes. Facility documents may permit changes based on appraisals, collateral performance, dilution, concentration or other defined credit conditions.
What is included in a borrowing base?
Eligible receivables and eligible inventory are common components, subject to advance rates, reserves, sublimits and the specific facility agreement.
Evaluate the financing structure
Financely provides paid structured debt and trade finance advisory for qualifying B2B transactions. We can review the requirement, structure the financing case and coordinate lender outreach. For a live requirement involving borrowing base certificate example, the scope can be assessed through the Request a Quote process.
Request a Quote