Borrowing Base Certificate

Supporting Reports to Attach

• Accounts receivable aging by customer and invoice, showing days outstanding.

• Accounts payable aging, which helps the lender spot contra accounts and stretched suppliers.

• Inventory report by location and category, ideally from a perpetual system.

• Sales journal and cash receipts for the period.

• Credit memo register showing returns, allowances and disputes.

• Reconciliation tying receivables and inventory totals to the general ledger.

Common Errors and How to Prevent Them

• Totals that do not tie. The ending receivables balance should match the aging and the general ledger. Reconcile before you sign.

• Unapplied cash and credits. Payments sitting unapplied overstate receivables. Clear them before running the aging.

• Late credit memos. Booking returns after the report date inflates eligible collateral and shows up as dilution at the next exam.

• Missed ineligibles. A customer that crossed the aging threshold, a new related company or goods moved to an unapproved warehouse must come out.

• Stale formulas. After an amendment changes advance rates or caps, update the template the same day.

• Invoicing before shipment. Billing for goods not yet delivered creates receivables that do not qualify and raises fraud concerns.

When Reported Numbers and Exam Results Differ

Field exams, often done quarterly, test your reported figures. When examiners find gaps, the lender may restate availability, add reserves, lower advance rates or require more frequent reporting. If the corrected figures show you were over-advanced, you will usually have to repay the difference quickly.

Because each borrowing base certificate is a signed representation, repeated or material misstatements can be treated as a default under the loan agreement. Accurate, consistent reporting is the simplest way to keep the lender's confidence and your access to cash.

Frequently Asked Questions

Who should prepare and sign the certificate?
Usually the controller or accounting team prepares it, and an officer named in the agreement, often the CFO, signs it. The signer should review the reconciliations, not just the final figure.

Can I submit the borrowing base certificate online?
Many lenders accept uploads through a portal or by email using their template. Some can pull data directly from accounting software, but you still certify the result.

What if I find an error after submitting?
Tell the lender promptly and send a corrected report. Fixing it yourself is far better than having an examiner find it later.

Explore Credit Lines That Fit Your Reporting Capacity

A well-run reporting process makes any collateral-based line easier to live with and can support better terms at renewal. When you compare facilities, ask each lender for its borrowing base certificate template and reporting schedule, and choose the one your team can complete accurately on time.

A borrowing base certificate is the signed report a business sends its lender to show how much collateral supports its line of credit and how much it can draw. It rolls forward your receivables and inventory since the last report, removes ineligible items, applies the agreed advance rates and reserves, and ends with a single figure: your current availability.

For anyone running finance at a company with a collateral-based line, this report is a routine deadline that directly controls access to cash. This page walks through what goes on the form, how the math works, how often it is due, and the mistakes that cause trouble at field exams.

What the Certificate Does

The certificate, often called a BBC, is the lender's main window into your collateral between field exams. Bank examiners describe these reports and their supporting schedules as a primary source of information on changes in a borrower's financing needs, cash conversion cycle and collateral condition.

It serves three purposes at once:

• It sets availability. The lender updates how much you can borrow based on the figures you report.

• It is a formal representation. An authorized officer, usually the CFO or controller, signs to confirm the figures are accurate and that the company complies with the loan agreement.

• It creates an audit trail. Field examiners later test the reported figures against your books, invoices and physical inventory.

Sections of a Typical Form

Formats vary by lender, but most certificates include these blocks:

1. Header: borrower name, certificate number, reporting date and period covered.

2. Receivables roll-forward: the prior ending balance, plus new invoices, minus collections, minus credit memos and discounts, plus or minus other adjustments, giving a new ending balance that must match your aging report.

3. Receivable ineligibles: each excluded category listed separately, such as aged invoices, cross-aged customers, affiliates, contra accounts and concentration excess.

4. Inventory: totals by category and location, minus ineligible stock, with the applicable advance rate or cap.

5. Reserves: any amounts the lender holds back, such as rent or tax reserves.

6. Loan balance roll-forward: the prior balance, plus advances and charged interest or fees, minus payments and collections applied.

7. Availability and excess availability: the final figures after comparing the collateral total with the line limit and the loan balance.

8. Certification: the officer's signature, title and date.

Sample Certificate Math

Here is a hypothetical monthly report for a distributor with an 80 percent advance rate on eligible receivables and 50 percent on eligible inventory at cost:

• Receivables: prior balance $900,000, plus $300,000 of new invoices, minus $250,000 collected, minus $10,000 in credit memos, equals $940,000.

• Ineligible receivables: $90,000, leaving $850,000 eligible. At 80 percent, that supports $680,000.

• Eligible inventory: $500,000 at cost. At 50 percent, that supports $250,000.

• Total collateral availability: $930,000, minus a $30,000 reserve, equals $900,000.

• Loan balance: prior balance $700,000, plus $150,000 of new advances, minus the $250,000 in collections applied, equals $600,000.

• Excess availability: $900,000 minus $600,000 equals $300,000.

If the line commitment were only $800,000, availability would be capped at $800,000 and excess availability would be $200,000.

Filing Frequency and Deadlines

The loan agreement sets how often you file. The OCC's handbook says lenders often require certificates and supporting documentation weekly or monthly, and higher-risk borrowers may have to report as often as daily. Retail borrowers commonly report daily or weekly because their inventory changes fast.

Some agreements tie frequency to performance. A company might file monthly while excess availability stays above a set level, then switch to weekly if it drops below. Missing a deadline can freeze new draws until the report arrives, so build the report into your month-end or week-end close.