By Brian Smith, Co-Founder and Managing Partner
The borrowing base determines how much liquidity a lender can safely advance against collateral. Ensuring that the base is accurate and truly liquid is one of the most critical steps in managing asset-based loans.
What Makes a Strong Borrowing Base?
- Clean, current receivables – minimal aging and low concentrations.
- Accurate reporting – alignment between general ledger, trial balance, and AR aging.
- Stable inventory valuation – consistent costing methods and regular turnover.
- Minimal ineligibles – clear identification of past-due, foreign, or related-party accounts.
How Lenders Assess Quality
LCG examines not just the numbers, but the processes behind them. We review customer payment behavior, credit memo usage, and collateral reporting systems to determine true borrowing base reliability.
Why it Matters
Weak collateral data can lead to over-advancing, audit exceptions, or even default. A detailed borrowing base review ensures both compliance and confidence.
Conclusion
Quality collateral is the cornerstone of sound lending. LCG provides the expertise to evaluate it thoroughly and objectively.
For any questions regarding borrowing base analysis and review, contact David Ruhlig at druhlig@lcgadvisors.com.