Communication With Your Lender Is Key to Managing Your Borrowing Base

When you’re not financing (or unable to finance) your company with an open line of credit through a bank, your company’s cash flow is managed one of two ways – either through collections or through a borrowing base. A borrowing base is the amount of money a lender (usually an asset based lender) is willing to loan your company based on the value of your company’s collateral. It’s calculated by adding up the assets you can use as collateral (e.g., accounts receivable, inventory, equipment) and applying a discount (risk factor) to come to the maximum amount the lender will provide. Typically, the amount equates to between 50% and 85% of the total collateral value depending on the type of collateral being financed.

Managing your borrowing base requires managing your collateral (having tight controls) and understanding your lender’s criteria for financing what your lender considers eligible and ineligible collateral. The impact of ineligible collateral can greatly affect your ability to run your business.

It’s also important to understand the effect of deposits and their impact on your borrowing capacity. Again, understanding your lender’s criteria will enable you to know what you’ll be able to borrow each month to run your business as effectively as possible.

Communication with your lender is key.

About Celtic Capital
Companies looking for working capital to cover operating expenses, fund growth, increase buying power and take advantage of vendor discounts and rebates turn to Celtic Capital. With an appetite for the more complex transactions, Celtic Capital has a history of success in crafting creative, flexible asset based financing solutions from $500,000 to $5 million with no financial covenants.

As an independent lender, working with companies nationwide, Celtic Capital is willing and able to alter price and deal structure and expand lines of credit to handle its clients’ increased revenues; and when cash flow is an issue, will look toward providing an inventory facility to help offset lost cash flow.

If you know of, or are, a business in need of non-traditional financing, contact Mark Hafner at 800.742.0733 or, or visit us at