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GLOSSARYTERMS AS A CREDIT DESK USES THEM

Borrowing base

What is a borrowing base, and when is it the wrong answer?

ONE OF 80 TERMS · FREE · NO SIGNUP

BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED

// THE SHORT ANSWER

A borrowing base ties a facility limit to the eligible assets behind it — typically a percentage of current receivables and inventory, reported and recalculated monthly. It is the right structure where the risk is that the asset pool shrinks faster than the limit does. It is the wrong structure on a clean file: conditions cost the borrower administrative weight every month and tell a good client the bank read a template rather than the numbers. Intensity of structure is a scarce resource priced in relationship currency.

BASIS  Practitioner judgment from sixteen years in commercial banking, set out in How Bankers Think (Highbank Press, 2026). Every borrower on this site is a composite constructed for teaching, not a client. The market is mid-market commercial lending as practised in New Zealand and Australia; where a convention differs elsewhere, the page says so.

// IN THE BOOK

Developed in chapter 3, Reading Real Demand vs. Plugging Holes.

// WORKED IN

// NEXT TO IT

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