borrowing base

Definition

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.

Use borrowing base in a sentence

If you want to take on a new big project you must first make sure that its budget won't exceed your borrowing base.

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After pledging their collateral, the bank then determined the borrowing base. The company needed these funds to continue their expansion.

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The credit line of our company was recently reduced as a result of our bank's determination as to the diminished value of our borrowing base.

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borrower's note borrowing power of securities