The amount of money a lender will loan to a company, based on the value of the collateral pledged by the company. A company can use various things for collateral, including inventory, company equipment, or even accounts receivable. The lender determines a discount factor, a certain percentage which is multiplied against the value of the collateral, and the resulting value is the amount of money that will be available to loan to the company. For example, if a company has inventory worth $100,000, and the lender's discount factor is 50%, the borrowing base is $50,000.

Copyright©2009 by InvestorWords.com. ALL RIGHTS RESERVED.

Reproduction of all or part of this glossary and/or this page, in any format, without written consent is prohibited. If you have questions about this dictionary please feel free to contact us feedback\@\investorguide.com