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Borrowing Base Financing

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BORROWING BASE FINANCING AGREEMENT

Parties and Effective Date

This Borrowing Base Financing Agreement (the "Agreement") is made as of by and between:

The Lender agrees to make advances to the Borrower subject to the terms herein and subject to the Borrowing Base defined below. The maturity date of the facility is unless earlier terminated in accordance with this Agreement.

Commitment, Facility and Availability

Availability under the facility shall be limited to the Borrowing Base, calculated in accordance with the Borrowing Base Schedule below, less any applicable reserves and outstanding Obligations. Availability is determined at the Lender's sole discretion at each availability calculation date.

Borrowing Base Schedule

The Borrowing Base shall be computed as follows. Enter current totals and applicable advance rates; Eligible Amounts will be calculated by the Lender.

Collateral Category Gross Amount Advance Rate (%) Eligible Amount
Accounts Receivable (eligible)
Inventory (eligible)
Other Collateral (describe)
Subtotal Eligible
Reserves and Ineligible Amounts (detailed in covenant)
Borrowing Base (Available Collateral)
Outstanding Advances
Availability (Borrowing Base minus Outstanding Advances)

Funding Mechanics, Interest and Fees

Advances shall be made upon Borrower request subject to confirmation of availability. Interest accrues daily and is payable monthly in arrears on the day of each month. Borrower shall reimburse Lender for reasonable fees and expenses incurred in connection with collateral administration and enforcement.

Representations and Warranties

Borrower represents and warrants that: (a) it is duly organized and validly existing under the laws of its jurisdiction; (b) the Borrower has full power and authority to enter into this Agreement and to grant the security interests contemplated herein; (c) Borrower's books and records accurately reflect the accounts, inventory and other collateral included in the Borrowing Base; and (d) no material adverse change has occurred since the date of the most recent financial statements delivered to the Lender.

Covenants

Borrower covenants to: (i) deliver a Borrowing Base Certificate in substantially the form required by the Lender on or before the monthly reporting date; (ii) maintain insurance on collateral with Lender as loss payee; (iii) preserve and not materially alter collection practices for accounts receivable; (iv) keep current financial statements and permit periodic audits; and (v) comply with any financial covenants set forth in Borrowing Base Certificate or schedule attached hereto.

Events of Default and Remedies

The following constitute Events of Default: failure to pay principal or interest when due; breach of any representation, warranty or covenant; insolvency or appointment of a receiver; material adverse change to collateral values; or any other event specified in this Agreement. Upon Event of Default, the Lender may, at its option, declare all Obligations immediately due and payable and exercise rights and remedies under applicable law, including foreclosure on collateral.

Borrowing Base Certificate

Fees, Payment Instructions and Remedies

Late payment shall incur a late fee equal to the greater of (i) 5% of the overdue amount or (ii) the maximum permitted by law. Borrower shall also reimburse Lender for all reasonable costs and expenses, including legal fees, incurred in enforcing this Agreement.

Notices

All notices required or permitted under this Agreement shall be sent to the addresses set forth below unless a party provides a written change of address in the manner prescribed herein.

Miscellaneous Provisions

This Agreement shall be governed by and construed in accordance with the laws governing security interests in commercial transactions. The parties agree that venue for disputes shall be as provided in a separate agreement or as mutually agreed. No waiver by Lender of any provision shall be effective unless in writing.

Lender:

By:

Date:

Borrower:

By:

Date:

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What Borrowing Base Financing Is

Borrowing Base Financing is a revolving credit facility where the lender advances funds against a calculated pool of eligible collateral, typically accounts receivable and inventory. The borrower submits a borrowing base certificate at agreed intervals documenting eligible balances, reserve deductions, and availability. Lenders apply advance rates and reserves, verify aging schedules and invoices, and may require UCC filings or other security documentation. This structure provides asset-backed working capital while limiting lender exposure through periodic reconciliations and reporting requirements under the loan agreement.

Why Borrowing Base Financing Matters

Borrowing base facilities convert working assets into flexible liquidity, often at lower cost than unsecured debt. They align borrowing capacity to current receivables and inventory, support seasonal needs, and provide lenders with collateral controls that reduce credit risk.

Why Borrowing Base Financing Matters

Typical Users and When They Benefit

Borrowing base financing suits businesses with fluctuating working capital tied to receivables or inventory and lenders focused on asset-secured credit.

  • Wholesale distributor with high A/R turnover and seasonal sales who needs revolving liquidity tied to receivables.
  • Manufacturing or retail firm that carries inventory and prefers borrowing capacity that scales with stock levels and sales.
  • Community or regional bank lending to middle-market firms requiring collateralized lines and regular borrowing base reporting.

These arrangements are commonly used by middle-market companies, specialty finance lenders, and commercial banks to manage cash flow and credit exposure.

Core Elements of a Professional Borrowing Base Certificate

A complete borrowing base package organizes collateral detail, calculations, and lender-required reserves so availability is transparent and verifiable.

Borrowing Base Schedule

Itemized list of eligible receivables and inventory by customer, invoice date, and aging with subtotals used to calculate availability for the advance.

Advance Rate

Percentage applied to eligible collateral categories (for example 80% for receivables, 50% for inventory) that determines the maximum advance against each class.

Eligible Collateral

Definitions and exclusions for receivables and inventory, including related-party receivables, pre-bill amounts, and ineligible SKUs or customers.

Dilution and Reserves

Allowances for returns, discounts, bad debts, and retention amounts that reduce the gross collateral to a net eligible figure.

Supporting Documentation

Required exhibits such as AR aging reports, invoice copies, deposit confirmations, and inventory counts that substantiate the certificate.

Certification & Signature

Authorized officer statement certifying accuracy, accompanied by date, printed name, title, and signature for lender reliance and audit trail.

Essential Data Elements to Include

Reporting Date: MM/DD/YYYY
Borrower Name: Legal entity name
AR Aging Totals: 30/60/90+ buckets
Inventory Value: Valuation basis
Advance Rates: Percent per collateral class
Authorized Signer: Name and title

Step-by-Step: Preparing and Submitting a Borrowing Base

Follow a repeatable process to produce an auditable borrowing base certificate that meets lender requirements and minimizes review delays.

  • 01
    Gather Records: Collect AR ledger, aging report, inventory counts, and invoice images.
  • 02
    Calculate Eligibility: Apply lender definitions, exclude ineligible items, compute net eligible collateral.
  • 03
    Complete Certificate: Populate schedule, show calculations, and attach supporting exhibits.
  • 04
    Submit to Lender: Deliver signed certificate and exhibits by agreed method and retain proof of delivery.

Recommended Digital Workflow Settings

Set up a consistent eSubmission workflow that matches lender preferences and retains an auditable record of each delivery.

Field Configuration
Document Format PDF with searchable text and embedded exhibits
Submission Frequency Monthly or as contract requires
Authentication Email plus optional 2FA or KBA
Delivery Output Signed PDF and CSV export for lender systems

Typical Submission Flow for Electronic Borrowing Base Certificates

An efficient submission flow minimizes manual steps and preserves evidence for audit and reconciliation.

  • Upload Document: Attach certificate and exhibits in a single, bookmarked PDF
  • Place Fields: Add signature, date, and checkbox fields for required attestations
  • Send to Lender: Use secure link or platform delivery per the loan agreement
  • Receive Acknowledgement: Obtain lender receipt and keep the audit trail

Technical Considerations for eSubmission and Integration

Confirm platform compatibility with lender requirements, file formats, authentication, and retention policies before automating submissions.

  • API Access: Required for automated delivery and retrieval of signed certificates
  • SSO / SAML: Recommended for centralized user management and stronger access controls
  • Supported Formats: PDF, DOCX, and CSV exports for ledger integration

Align integrations with accounting and loan servicing systems such as ERP or CRM, and retain exports for audits and regulatory compliance.

Consequences of Incorrect or Incomplete Borrowing Base Reporting

Availability Overstatement: May trigger repayment or immediate cure
Covenant Breach: Leads to default and higher fees
UCC Priority Loss: Improper filings risk subordinated security
Delayed Funding: Causes cash-flow interruptions
Regulatory Exposure: HIPAA or consumer law violations possible
Audit Findings: Require restatements or indemnities

Common Preparation Errors to Avoid

  • Including ineligible receivables such as disputed invoices or related-party balances that lenders explicitly exclude.
  • Failing to support inventory values with count sheets or valuation methodology, leading to time-consuming lender adjustments.
  • Missing or misdated invoices and remittance evidence which prolongs lender verification and delays availability.
  • Not using consistent aging cutoffs or date formats, causing calculation discrepancies and repeated lender queries.

eSignature Vendor Pricing and Feature Snapshot

Compare common plan criteria for electronic signing providers; signNow is listed first per vendor comparison conventions without date annotations.

signNow DocuSign Adobe Sign PandaDoc HelloSign
Starting Price $8/user/mo $15/user/mo $14/user/mo $19/user/mo $15/user/mo
Free Trial 7-day free trial Varies by plan Varies by plan Varies by plan Varies by plan
Bulk Send Yes Yes Yes Yes No
Audit Trail Yes Yes Yes Yes Yes
HIPAA Compliant Yes Yes Yes No No

FAQs: Practical Answers About Borrowing Base Financing

Answers to frequently asked questions about preparing, signing, and submitting borrowing base certificates, with attention to legal and compliance points.


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