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A borrowing base report (BBR) is a structured calculation that shows a lender what collateral is eligible today, what advance rates apply, what reserves are deducted, and what the borrower’s current availability is under the borrowing base facilities agreement. It is the operational backbone of many asset based lending revolvers and trade finance secured loans. Without it, the lender cannot safely release funds or keep the facility in compliance.
ABL facilities typically fund against eligible accounts receivable, inventory, and sometimes equipment. Reporting creates the “availability” number and drives collateral monitoring, field exams, and covenant testing. For service context, see Asset-Based Lending Services.
Trade finance secured loans often blend inventory, in-transit goods, export receivables, and documentary controls (warehouse receipts, bills of lading, insurance endorsements). A strong overview of facility types is Trade Finance Credit Facilities Explained.
Physical commodity traders commonly use borrowing base facilities sized to stock and confirmed receivables with haircuts for price volatility and operational risk. See Borrowing Base Facilities for Physical Commodity Traders and Warehouse vs Tank Receipt Financing.
In syndicated trade finance, the agent often receives a borrowing base report and verifies calculations before advances or instrument issuance. For facility operations, see Syndicated Trade Finance Facilities Explained.
Most borrowing base reports follow the same logic. The categories differ, but the sequence stays consistent: start with gross collateral, subtract ineligible items, apply advance rates, deduct reserves, then compare to current outstandings.
| Section | What it shows | Why lenders care |
|---|---|---|
| Collateral summary | Receivables, inventory, in-transit goods, other eligible collateral | Defines what the facility is actually secured by today |
| Eligibility schedules | Ineligibles by rule (aging, disputes, offsets, concentration, location) | Prevents weak collateral from inflating borrowing capacity |
| Advance rate application | Applied funding percentages on eligible collateral | Creates lender margin for loss, volatility, and liquidation friction |
| Reserves | Discretionary and formula reserves (dilution, returns, taxes, hedging, fees) | Catches risks that are real but not perfectly captured by eligibility |
| Availability | Borrowing base minus outstanding loans and L/C usage | Controls how much can be drawn today without breaching |
| Certification | Officer sign-off, data integrity attestation, exceptions log | Creates accountability and audit trail |
Eligibility rules are not random. They reflect two lender realities: liquidation value is lower than accounting value, and operational errors happen. The rules are designed to reduce both loss and surprise.
Common ineligibles: aged receivables over the permitted bucket, disputes, credits and offsets, contra accounts, intercompany balances, foreign receivables without acceptable credit insurance, and invoices missing evidence of delivery or acceptance.
Common controls: concentration limits by obligor, country, and buyer group; cross-aging rules; dilution tracking; and periodic reconciliation to the general ledger.
Common ineligibles: obsolete or slow-moving stock, consigned or third-party owned goods, goods outside approved locations, damaged goods, goods without acceptable title evidence, and inventory subject to competing liens.
Trade finance add-on: inventory can be eligible only if stored under lender-approved control, often with third-party collateral management. See Collateral Management Agreements in Trade Finance.
Common ineligibles: shipments without clean bills of lading, unclear Incoterms risk transfer, missing insurance endorsements, missing inspection evidence, or non-approved corridors and ports.
Practical trade flow setup is covered in Warehouse Receipt Finance with a Named Collateral Manager.
Some secured loans allow additional collateral buckets such as letters of credit proceeds, cash dominion accounts, or pledged securities. These are deal-specific and driven by the lender’s ability to control and liquidate.
If you are structuring a facility, review Trade Finance Facility Term Sheet Explained to see how lenders draft controls, reporting cadence, and reserves.
Three levers drive borrowing capacity. Eligibility decides what counts. Advance rates decide how much it counts for. Reserves subtract risk that is hard to capture in a clean rule. In asset based lending and trade finance, the “right” number is the one that survives stress and still protects the lender.
Advance rates vary by collateral quality, diversification, and controls. Receivables typically fund higher than inventory. Inventory typically funds higher when held under strong control and priced to an index with conservative haircuts.
In trade finance secured loans, in-transit funding often requires documentary triggers and insurance endorsements. See Structured Commodity Trade Finance (PXF/PPF/BBF).
Reserves are where lenders price in reality: returns and allowances, dilution, freight claims, duty and tax exposure, hedging and margin calls, storage and demurrage, unpaid vendor liens, and operational exceptions.
This comes up constantly in commodity and cross-border files. A practical discussion of reserves and controls is in How Trade Finance Loans Improve International Trade Operations.
Below is a simplified example that mirrors how lenders think. Your facility definitions will differ, but the structure is standard.
| Line Item | Amount | Notes |
|---|---|---|
| Gross accounts receivable | $10,000,000 | Invoice ledger total |
| Less: AR ineligibles | ($2,650,000) | Aging, disputes, offsets, concentration, dilution reserve |
| Eligible accounts receivable | $7,350,000 | Eligible AR after eligibility rules |
| AR advance rate | 85% | Facility-defined rate |
| AR borrowing base value | $6,247,500 | Eligible AR × advance rate |
| Gross inventory | $8,000,000 | At cost or defined valuation basis |
| Less: inventory ineligibles | ($2,000,000) | Obsolete, consigned, unapproved locations, missing title evidence |
| Eligible inventory | $6,000,000 | Eligible inventory after eligibility rules |
| Inventory advance rate | 65% | Facility-defined rate |
| Inventory borrowing base value | $3,900,000 | Eligible inventory × advance rate |
| Eligible in-transit goods | $2,500,000 | Only with documentary and insurance controls |
| In-transit advance rate | 60% | Often lower than warehoused inventory |
| In-transit borrowing base value | $1,500,000 | Eligible in-transit × advance rate |
| Gross collateral value | $11,647,500 | Sum of collateral values above |
| Less: reserves | ($1,100,000) | Hedging/margin, minimum excess, duties, fees |
| Borrowing base | $10,547,500 | Gross collateral value minus reserves |
| Less: outstanding loans and L/C usage | ($8,200,000) | Includes funded and contingent usage |
| Availability | $2,347,500 | Borrowing base minus outstandings |
The detailed schedules: AR aging, inventory listings, ineligibles, reserves, and supporting detail. Think of it as the workbook lenders can audit.
The signed summary: a management certification stating the calculation is true and complete, and that the facility remains in compliance. Some lenders call this an availability certificate.
In trade finance, this connects directly to draw mechanics. See Exact Process to Raise Trade Finance From Lenders.
Lenders do not only check the math. They test whether your data, controls, and processes can be relied on under stress. In secured loans, this is risk management and legal defensibility.
The receivables schedule should reconcile to the general ledger control account. Inventory listings should reconcile to the warehouse management system and accounting inventory balance. Unexplained deltas are a fast way to reduced availability.
Lenders sample invoices, verify delivery evidence, test disputes and credits, and validate concentration calculations. In trade finance, they also test document trails. See Trade Finance Workflow.
Field exams validate that reporting reflects reality. Inventory is counted. Receivables are confirmed. If trade goods are funded, lenders check title evidence, storage control, and release rules. A CMA overview is here.
Many ABL facilities include controlled collections or springing dominion. Lenders track whether collections hit the right account and whether remittances and deductions match the agreement.
Trade finance reporting often adds documentary control fields that are less common in domestic ABL: shipment status, Incoterms, inspection milestones, bills of lading dates, insurance endorsements, warehouse receipts, and release authorizations. If you fund physical commodities, see Metals Trade Finance Advisory: LCs, SBLCs, Borrowing Base.
Typical lender asks: bill of lading details, vessel or flight, insurance endorsements naming lender as loss payee, inspection certificates, and documentary chain of title evidence.
For warehoused collateral, start with Warehouse Receipt Finance.
In commodities, lenders often link availability to price indices and impose additional reserves when volatility rises. If hedging is in place, margin account exposure can become a reserve.
Small rule violations pile up: aged invoices left in, disputed receivables not flagged, inventory moved to non-approved locations, or shipments funded before documents are complete.
Returns, allowances, rebates, and credit notes erode receivables value. Lenders reserve for it and will widen the reserve if reporting is slow or inconsistent.
One buyer, one country, one storage location, one commodity corridor. Concentration limits protect lenders from correlated loss. Breaches usually mean immediate ineligibles and reduced availability.
If the AR aging or inventory listing does not reconcile to the GL, lenders treat the report as unreliable. That leads to tightened draw approvals and more frequent audits.
A “good” borrowing base report is not the one that produces the largest availability. It is the one that a lender can test and still sign off on. That takes clean definitions, repeatable extraction, and a clear exception log.
Eligibility rules must match the agreement. “Eligible receivables” means whatever your signed definition says. Same for advance rates and reserves. Never run a home-made definition once the facility is live.
If you are negotiating the document set, start with Trade Finance Facility Term Sheet Explained.
Create a repeatable export from ERP and warehouse systems, then reconcile to GL totals before you send the report. Track adjustments with a clear audit trail.
Disputes, returns, short shipments, inspection failures, and title exceptions should be logged and reflected in ineligibles or reserves. Lenders can forgive bad weeks. They rarely forgive hidden exceptions.
If your trade flow needs collateral management or controlled releases, design it into the process from day one. Do not bolt it on after funding starts. See Structured Trade Finance for the broader structure.
| Cadence | Typical context | What it implies |
|---|---|---|
| Weekly | New facility, volatile collateral, higher-risk trade flow | Lender wants tight monitoring, faster reserve adjustments |
| Bi-weekly | Stable cycle but still operational complexity | Balanced oversight and borrower burden |
| Monthly | Mature facility with strong performance history | Confidence in reporting, lower monitoring intensity |
| Event-driven | Triggers: concentration breach, audit issues, covenant stress | Control tightens quickly when risk increases |
Submit your collateral summary, reporting samples, and target facility size. We respond with a structured document request and a path to lender term sheets, or a written reason why the file is not bankable today.
Is a borrowing base report only for asset based lending?
No. Borrowing base reporting appears in asset based lending, inventory financing, and trade finance secured loans. The collateral buckets change, but the logic stays the same.
How do lenders decide what is “eligible”?
Eligibility follows the facility definitions and the lender’s ability to control and liquidate. Aging, disputes, title evidence, location control, and concentration risk are common drivers.
What is the difference between a borrowing base certificate and an availability certificate?
They are often the same concept. It is the signed summary that certifies the calculation and compliance, supported by the detailed schedules in the borrowing base report.
Why do reserves change even when eligibility looks stable?
Reserves capture risks that are not fully captured by eligibility, such as dilution trends, price volatility, duty exposure, hedging margin exposure, and repeated operational exceptions.
What causes lenders to tighten a facility?
Unreconciled reporting, repeated eligibility breaches, concentration creep, audit findings, slow collections, rising disputes, or operational mismatch between facility controls and the real trade flow.
Where can I see how lenders draft reporting requirements?
Start with Trade Finance Facility Term Sheet Explained and Trade Finance Deal Structuring and Lender Introductions.
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