Asset-based lending

Lending supported by specified collateral, often receivables and inventory. A borrowing base applies eligibility rules and advance rates; available borrowing also depends on reserves, facility limits and amounts already drawn.

Asset-based lending at Hanil Widget Works

Using the stated Hanil balances of 7.9m in receivables and 4.7m in inventory, assume both are fully eligible and use illustrative advance rates of 85% and 50%. The gross borrowing base is 7.9m × 85% + 4.7m × 50% = 9.065m, approximately 9.1m, in the same monetary units. This is not undrawn availability: reserves, the facility limit and existing utilization must also be considered.

Illustrative gross borrowing base; stated balances assumed fully eligible
firstReceivables 7.9m at 85%
+Inventory 4.7m at 50%
=Gross borrowing base 9.065m ≈ 9.1m

Source: OCC: asset-based lending handbook.

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