Borrowing Base for Fuel Traders with Tank Inventory
A borrowing base is a revolving facility whose availability is recalculated against eligible assets, usually receivables and inventory, after ineligibles, concentrations and reserves. For a fuel trader, refiner or distributor, the asset that usually matters is product in a.
A borrowing base is a revolving facility whose availability is recalculated against eligible assets, usually receivables and inventory, after ineligibles, concentrations and reserves. For a fuel trader, refiner or distributor, the asset that usually matters is product in a named shore tank. That inventory is only eligible if a lender can trust the grade, the volume, the title and the release mechanics. A tank booking on someone else's account is not a borrowing base.
Financely already explains borrowing base financing for physical commodity traders in general terms. The blog also has inventory-backed trade finance for refined petroleum products and structured commodity finance for petroleum traders with storage contracts. This guide does not rewrite those pages. It focuses on eligibility: what tank inventory a capital provider may admit, mark down, cap or exclude when the product is Jet A-1, EN590, mazut or a similar grade.
What usually counts as eligible fuel inventory
Eligible inventory, in a fuel book, is typically product that the borrower owns or has a clearly documented right to pledge, that sits in a named location a lender can accept, that meets a named specification, and that can be sold to a known class of buyers. Independent inspection and a collateral management agreement are often what make those facts visible. In-transit stock, product in an unapproved terminal, commingled product that cannot be identified, off-spec product, and stock already pledged to someone else are the usual exclusions.
Title and release have to work in practice, not only on a slide. If the terminal will release on the trader's instruction alone, the inventory is weaker than the facility documents suggest. Read title transfer and release procedures for fuel in tank together with collateral management for fuel traders. Mazut and other residual grades may be ineligible, or more tightly reserved, because the buyer universe is narrower and origin screens are heavier. See Mazut M100 trade finance and how lenders treat Jet A-1, EN590 and mazut differently.
How the base is tested
A typical reporting cycle uses a borrowing-base certificate, inventory reports, receivables listings, and the collateral manager's or inspector's figures. The lender applies eligibility filters, then concentrations, then reserves. Concentrations can be set by grade, by terminal, by country, or by buyer. Reserves can reflect quality uncertainty, hedging gaps, or a simple haircut. None of those percentages is published here, because they are set in the facility and vary by lender and by book.
Receivables from fuel sales may enter the same base if they are evidenced, not in dispute, and not overdue beyond the agreed limit. A receivable owed by an unscreened trader, or by a buyer in a corridor the lender will not take, may be ineligible even if the invoice is real. Know-your-transaction work still applies, as set out in KYT checks for oil, gas and refined fuel trades.
| Inventory type | Often eligible, subject to the facility | Often ineligible or tightly reserved |
|---|---|---|
| Named grade in a named, approved shore tank, under a CMA, with current Q&Q | Yes, after the agreed filters | If the terminal or the manager is not acceptable to the lender |
| Product afloat under documents the lender can control | Sometimes, with a tighter limit | If there is no reliable inspection or no control of discharge |
| In-transit truck, rail or pipeline movements | Rarely, or only with strict caps | When location and quality cannot be verified in time |
| Off-spec, commingled, or already pledged stock | No | This includes paper inventory that the terminal cannot confirm |
What to prepare before you ask for a base
- A stock report that a third party can recognize, not an internal spreadsheet only.
- Storage contracts, tank numbers, and any existing CMA or SMA.
- Current independent Q&Q, and a plan for ongoing inspection. See independent inspection and Q&Q in fuel trade finance.
- Evidence of title, insurance and the right to pledge or release.
- A receivables listing, if receivables will be in the same facility, with buyer names that can be screened.
- A plain description of the grades you hold, including whether residual fuel is in the book.
Mixed books and residual fuel
Many traders hold more than one grade. A base can be written to cover Jet A-1 and EN590 together, with sub-limits, and still exclude or tightly reserve mazut or other residual fuel. That is a policy choice by the capital provider, not a slight. If residual fuel is an important part of the book, say so at the start, and be ready for a separate discussion of origin, end-use and heating. Do not hide a residual position inside a diesel inventory report.
Reporting has to be frequent enough that the base can be trusted between certificates. Weekly or more frequent stock figures are common when prices move or when tanks turn quickly. A monthly certificate with no supporting tank reports is a weak pack. Hedging, if the book is hedged, should also be described, because an unhedged inventory position changes the reserve conversation even when the tanks are well controlled.
Financely is an advisor and arranger. We help you build the reporting pack and introduce the mandate to capital providers. We do not lend, and we do not promise an advance rate. If the commercial problem is still finding a real supplier, solve that first. If the book is real, submit it through deal submission.
Frequently Asked Questions
Is all fuel in a terminal eligible for a borrowing base?
No. Eligibility usually requires identifiable title, an approved location, a named specification, current inspection, and release mechanics a capital provider can accept. Off-spec, commingled, in-transit, or already pledged stock is often excluded. A tank booking on someone else's account is not eligible inventory.
Do I need a collateral manager?
Many fuel inventory facilities do. A CMA is one of the usual ways to make location, quantity, and release visible to a capital provider. The manager is independent of Financely and of the borrower, and has to be acceptable to the provider that is asked to consider the facility.
Will Financely tell me the advance rate?
No. Advance rates, reserves, and concentration limits are set by the capital provider after it reviews the book, the locations, and the offtake. Financely is an advisor and arranger. This article does not invent those figures, and no rate should be treated as a market standard.
Can mazut inventory be included?
Only if the capital provider's policy allows residual fuel, and only if origin, specification, custody, and offtake can be evidenced. Some facilities exclude mazut entirely. See the Mazut M100 trade finance page for the product file, and do not assume distillate eligibility applies to residual fuel.
Financely is an advisor and arranger, not a lender and not a supplier. If you have a real transaction and need a lender-ready file, submit the mandate through the intake form.
You can also read how structured trade finance advisory is scoped before you send the file.
Sources and references
- Eligibility, reserves and concentrations are facility-specific. No advance percentages are stated in this article.
- Related Financely pages: borrowing base for physical commodity traders; inventory-backed refined petroleum; CMA for fuel traders.
- Financely deal submission: https://www.financely.io/deal-submission