CrediArc executive briefing
Asset-Based Lending Borrowing-Base Guide
A field guide to receivables eligibility, concentration, dilution, reserves, advance rates, and the controls behind a defensible borrowing base.
What this page covers
A borrowing base converts collateral records into controlled availability. The calculation is only as reliable as the underlying customer matching, eligibility rules, exclusions, reserves, and reporting controls.
The objective is not to maximize eligible collateral. It is to measure collateral that is identifiable, collectible, legally available, and monitored at a frequency consistent with the facility's risk.
1. Establish the collateral population
Reconcile the A/R aging to the general ledger and remove records that do not represent enforceable third-party receivables. Normalize customer identities before measuring concentration.
Match aliases and related obligors
Separate credits and unapplied cash
Identify contra and intercompany balances
Confirm invoice and shipment evidence
2. Apply eligibility rules record by record
Eligibility should be reproducible from documented rules. Common tests cover delinquency, disputes, cross-aging, foreign receivables, government claims, retention, contra accounts, and concentration caps.
3. Measure dilution and collection behavior
Credit notes, returns, rebates, disputes, and short payments reduce the amount ultimately collected. Compare trailing dilution with the assumptions embedded in the advance rate and reserves.
Gross and net dilution
Days sales outstanding trend
Roll rates between aging buckets
Top-obligor payment performance
4. Calculate availability transparently
Show gross collateral, each exclusion, concentration cap, reserves, eligible collateral, advance rate, gross availability, outstanding loans, and resulting excess availability. Retain a line-level audit trail.
5. Connect controls to funding
Define reporting frequency, lockbox or dominion arrangements, verification, audit rights, exception authority, and triggers for reserves or ineligibility. Controls should tighten as collateral volatility increases.
Borrowing-base control checklist
A/R reconciled to the ledger
Customer identities normalized
Eligibility rules documented
Concentration caps applied
Dilution and roll rates reviewed
Reserves individually explained
Availability bridge retained
Exceptions approved and time-bound