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GLOSSARYTERMS AS A CREDIT DESK USES THEM

Borrowing base certificate

What is a borrowing base certificate, and how does a lender check it?

ONE OF 366 TERMS · FREE · NO SIGNUP

BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED

// THE SHORT ANSWER

A borrowing base certificate is the report a borrower signs and sends its lender, usually monthly and sometimes weekly, that works out how much it may draw under an asset-based facility: receivables and stock, less the amounts the facility treats as ineligible, multiplied by the advance rates, less any reserves. With US$10m of debtors, US$2m ineligible and an 80% advance rate, availability is US$6.4m; drawn at US$5.5m, the business has US$0.9m left. The lender checks it against the aged debtors report and periodic field audits, because a certificate prepared generously is a facility quietly larger than the one approved.

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.

// WHAT IT IS NOT

A compliance certificate reports the financial covenants, usually with each set of accounts; a borrowing base certificate reports the collateral that sets how much can be drawn.

// WORKED IN

// NEXT TO IT

RECEIVABLES AND TRADE

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