What Is a Borrowing Base?

A borrowing base is the amount of financing available based on eligible collateral.

In receivables-backed lending, that collateral is usually a pool of eligible invoices, contracts, or accounts receivable.

The borrowing base helps determine how much capital a business can access.

How a borrowing base works

A lender reviews the business’s receivables and determines which receivables are eligible.

Then the lender applies an advance rate to those eligible receivables.

For example, if a business has $500,000 of eligible receivables and an 80% advance rate, the borrowing base may support up to $400,000 of availability.

The exact amount depends on the financing structure and underwriting criteria.

Why not every receivable counts

Not every receivable may be eligible.

A lender may exclude or reduce receivables that are:

• Too old
• Disputed
• Missing documentation
• Owed by weak counterparties
• Subject to offsets or credits
• Outside approved payment terms
• Too concentrated in one customer

Eligibility rules help manage risk.

Why borrowing bases change

A borrowing base can change over time.

Availability may increase when:

• New eligible invoices are added
• New contracts are approved
• Customers pay reliably
• Receivables grow

Availability may decrease when:

• Invoices are collected
• Receivables become overdue
• A customer disputes payment
• Documentation is incomplete
• Receivables age out

This makes borrowing-base financing more flexible than a fixed term loan.

Why borrowing bases matter for creative businesses

Creative businesses often have uneven receivables.

A media business may have a large sponsorship payment due next month. A creator agency may have several brand campaign invoices outstanding. A production company may have project-based receivables tied to milestones.

A borrowing base can help translate those receivables into potential working capital availability.