Borrowing Base

Category: finance

The dynamic formula determining the maximum amount of credit a business can access under an asset-based loan.

Calculated as a raw percentage of eligible assets: for example, 85% of accounts receivable under 90 days old plus 50% of finished goods inventory. Ineligible assets (such as past-due invoices or raw materials) are stripped from the calculation loop to insulate the lender from loss.

Common Examples

• The audit stripped our past-due retail accounts from the borrowing base math, lowering our available credit line by $150,000.
• Maintaining clean accounting records ensures the corporate borrowing base calculation matches our daily operational cash needs.