Borrowing Base

A collateral management tool used by lenders to determine the amount of credit that can be extended to a borrower in a loan secured by assets, such as accounts receivable, inventory, or equipment. The borrowing base is calculated as a percentage of the value of the assets, and it acts as a cap on the amount of credit that can be extended, providing protection to the lender. To learn more about the concept, see 90 Second Lesson: Early Warning Signs of a Troubled Loan and Business Borrowing Basics – Negotiating A Loan Agreement.