Definition
The maximum amount available under an asset-based line, calculated from eligible collateral.
Why it matters
It's typically recalculated weekly or monthly from your aging report.
Where it shows up in a deal
The borrowing base lives in a certificate you sign and submit on an agreed cycle, listing eligible collateral, the ineligibles deducted from it, the advance rates applied and any reserves the lender holds. The lender recalculates availability from that certificate, and draws are approved against the result rather than against the facility limit.
What it affects
- Availability falls automatically as invoices age out of eligibility, with no decision by the lender.
- A late or stale certificate usually suspends new draws until it is filed.
- Discretionary reserves let a lender reduce availability for dilution, disputes or accrued fees.
- Going over formula triggers repayment from the next collections rather than on your own schedule.
A worked example
Eligible AR of $1,200,000 at an 85% advance gives $1,020,000 of availability against $950,000 outstanding - $70,000 of headroom. If $150,000 of invoices become ineligible, eligible AR falls to $1,050,000 and availability to $892,500, putting the loan $57,500 over formula.
The common mistake
Related terms
- Asset-Based LendingA revolving credit line secured by receivables, inventory or equipment.
- Eligible ReceivablesInvoices that meet a funder's criteria for advancing.
- Over-AdvanceA temporary advance above the normal borrowing base.
- Aging ReportA report that groups unpaid invoices by how long they've been outstanding.
Questions about how borrowing base affects your facility?
Call (929) 658-8087 or request a written quote — no obligation, no credit impact.
