Vector ML AnalyticsDIGITAL CFO FOR FINANCIAL INSTITUTIONS

Sample report with line-by-line commentary

How to read a borrowing base certificate

A complete sample certificate, with its eligibility and concentration schedules and covenant tests, explained line by line: where each number comes from, what it means, and what to check before you sign or send it.

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All figures are illustrative and not from any real facility. Educational material, not legal, financial or credit advice.

HOW TO READ A BORROWING BASE CERTIFICATEVector ML Analytics

What a borrowing base certificate is

A borrowing base certificate (BBC) is a report a borrower gives its lender, usually monthly, that answers one question: how much is the lender willing to have outstanding right now?

A facility lends against a pool of receivables, not against the company in general. Each month the pool changes: new loans are added, old ones are repaid or go bad. The certificate recalculates how much of the pool the lender will finance, and compares the result with what the borrower has already drawn.

The seven steps

1Gross receivables

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2Remove ineligibles

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3Remove excess concentrations

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4Apply advance rate

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5Subtract reserves

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6Cap at commitment

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7Compare with drawn balance

The formula. Borrowing base = (gross receivables − ineligibles − excess concentrations) × advance rate − reserves.
Availability = the lesser of (borrowing base, commitment) − drawn balance.

Who prepares it, who reads it

The borrower (preparer)

Finance or treasury builds it from the loan tape or servicing system, applies the eligibility rules in the credit agreement, and an authorized officer signs it. Mistakes here can mean an overdraw, a covenant breach or a misrepresentation.

The lender (reader)

Credit or portfolio teams check that the numbers tie to the data, review the ineligibles and concentrations, and decide whether the borrower can draw more or must repay.

Why it matters

It sets how much cash you can draw. A larger base means more availability.
It can shrink without any missed payment. If loans turn delinquent or concentrations grow, they drop out of the base, and the borrower must repay or fund them with cash or equity.
It is a signed statement. The officer certifies the figures, so accuracy has legal weight.

Terms such as advance rate, reserves and eligibility vary by agreement. This report shows a typical structure, not any specific contract.

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HOW TO READ A BORROWING BASE CERTIFICATEVector ML Analytics

The sample certificate, annotated

ILLUSTRATIVE FIGURES, $ MILLIONS

Borrower: Example Funding LLC · Lender: Example Bank · Facility: Senior secured revolving facility · As of: 30 Sep 2026

	Line	$ millions	How to read it
A. Receivables pool
1	Gross receivables outstanding	100.00	Total unpaid balance of the pool at the as-of date. Must tie to the loan tape and ledger.
2	Less: ineligible receivables	(10.00)	Loans that fail the agreement's criteria. Detail in Schedule 1.
3	Less: excess concentrations	(6.20)	Only the amount above each limit. Detail in Schedule 2.
4	Eligible receivables	83.80	Lines 1 + 2 + 3. The pool the lender is willing to count.
B. Borrowing base
5	Advance rate	80.0%	Share of the eligible pool the lender will finance. Fixed by the agreement.
6	Available advance	67.04	Line 4 × line 5.
7	Less: reserves	(2.00)	Amounts held back for interest, fees or other risks, as defined in the agreement.
8	Borrowing base	65.04	Line 6 minus line 7. The most the pool supports.
9	Facility commitment	75.00	The ceiling the lender has agreed to, regardless of the pool.
10	Usable base	65.04	The lesser of lines 8 and 9.
C. Availability
11	Drawn balance	55.00	Loans outstanding per the lender's statement.
12	Availability / (deficiency)	10.04	Line 10 minus line 11. Positive: you can draw more. Negative: a deficiency.
13	Utilization	84.6%	Line 11 ÷ line 10. Above about 90% is a common warning level.
14	Status	In compliance	Availability is positive and utilization is under 90%.

Reading the result. The pool supports $65.04M of borrowing, and $55.00M is drawn, so the borrower can draw another $10.04M. Utilization is 84.6%, below the 90% warning level.

Numbers match the defaults in Vector's Borrowing Base Certificate Excel template, so you can change them and watch the result move.

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HOW TO READ A BORROWING BASE CERTIFICATEVector ML Analytics

Line-by-line guide (lines 1 to 7)

What each line means, where the number comes from and what a careful reader checks.

	Line	What it means	Where it comes from	What to check
1	Gross receivables	The starting point. Everything else is a deduction from it.	Servicing system or loan tape, reconciled to the general ledger.	Does it tie to last month plus new loans minus collections and write-offs? Is the date the as-of date, not a later one?
2	Ineligibles	Receivables the lender will not finance because they fail a test in the agreement.	Schedule 1: each category totalled from the loan tape.	Are the definitions (for example days past due) exactly the ones in the agreement? Is any category missing?
3	Excess concentrations	The part of any merchant, broker or industry exposure above its limit.	Schedule 2: balance minus limit for each name or group.	Is only the excess excluded, not the whole exposure? Is any loan counted twice?
4	Eligible receivables	What is left after ineligibles and excess concentrations.	Calculated: 1 + 2 + 3.	Eligible as a percentage of gross (83.8% here). A falling percentage is an early warning.
5	Advance rate	The lender finances this percentage of eligible receivables. The rest is funded by the borrower's own capital.	Credit agreement; may step down if performance weakens.	Is it the current rate? Does a trigger apply this month?
6	Available advance	The financing the eligible pool could support before reserves.	Calculated: 4 × 5.	Recompute it by hand.
7	Reserves	Cash held back for items such as interest, fees or dilution so the lender stays covered.	Formula in the agreement; sometimes set by the lender.	Are they formula-based and capped, or discretionary? Do they match last month's method?

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HOW TO READ A BORROWING BASE CERTIFICATEVector ML Analytics

Line-by-line guide (lines 8 to 13)

	Line	What it means	Where it comes from	What to check
8	Borrowing base	The maximum the pool supports after reserves.	Calculated: 6 minus 7 (never below zero).	This is the number to track month to month.
9	Commitment	The ceiling on the facility, even if the pool supports more.	Credit agreement and any increases (accordion).	Has the commitment changed? When does the revolving period end?
10	Usable base	What can actually be borrowed: the lesser of base and commitment.	Calculated: lesser of 8 and 9.	If the commitment is lower than the base, extra pool quality has no value.
11	Drawn balance	Loans currently outstanding under the facility.	Lender's statement or agent report.	Does it match the lender's records? Check whether accrued interest or fees are included.
12	Availability	How much more can be drawn. Negative means the borrower has borrowed more than the base allows.	Calculated: 10 minus 11.	If negative, how much cash or equity covers it, and by when? See page 8.
13	Utilization	How much of the usable base is already drawn.	Calculated: 11 ÷ 10.	A high figure means little room for a worse month.

The three numbers to watch.
1. Eligible as % of gross (83.8% here): shows pool quality.
2. Borrowing base ($65.04M): the ceiling on borrowing.
3. Availability ($10.04M) and utilization (84.6%): show how much room is left.
If these move the wrong way for two months in a row, act before the next certificate.

Common reading errors. Treating availability as cash you will receive (it is only capacity to draw); forgetting that reserves can change; comparing a certificate with the wrong as-of date; and assuming the sample’s 80% advance rate applies to your facility.

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HOW TO READ A BORROWING BASE CERTIFICATEVector ML Analytics

Schedule 1: ineligible receivables

Category	$ millions	% of gross
Delinquent beyond cut-off (30+ days, no remittance)	(6.00)	6.0%
Defaulted or charged off	-	0.0%
Renegotiated or restructured	(1.20)	1.2%
Past maturity / beyond maximum term	(0.80)	0.8%
Bankrupt or insolvent merchant	(0.50)	0.5%
Fraud or breach of representation	(0.30)	0.3%
Affiliate or related-party	(0.40)	0.4%
Outside eligible country / currency	(0.80)	0.8%
Other ineligible	-	0.0%
Total ineligible (flows to line 2)	(10.00)	10.0%

How to read it

Delinquency is the largest item. $6.00M of the $10.00M is loans past the cut-off. It is also the item that moves fastest in a bad month.
Each category needs a definition. "Delinquent" might mean 30 days without a remittance in one agreement and 60 days in another. The cut-off changes the total.
Ineligible is not the same as written off. These loans still exist and may still pay, but the lender does not finance them, so you fund them yourself.

Where the $10.00M comes from

Delinquent beyond cut-off

6.00

Renegotiated or restructured

1.20

Past maturity / beyond maximum term

0.80

Bankrupt or insolvent merchant

0.50

Fraud or breach of representation

0.30

Affiliate or related-party

0.40

Outside eligible country / currency

0.80

Ineligible receivables by category, $ millions.

Link to the certificate. This $10.00M is line 2. Because the lender finances 80% of eligible receivables, each $1.00M that becomes ineligible lowers the borrowing base by $0.80M and the borrower funds the rest.

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HOW TO READ A BORROWING BASE CERTIFICATEVector ML Analytics

Schedule 2: concentrations and excess

Name	Balance $M	% of gross	Limit	Excess $M
Merchants (limit 3% of gross = $3.00M)
Merchant 1	4.00	4.0%	3%	1.00
Merchant 2	3.20	3.2%	3%	0.20
Merchant 3	2.10	2.1%	3%	-
Merchant 4	1.50	1.5%	3%	-
Merchant 5	1.20	1.2%	3%	-
ISOs / brokers (limit 15% = $15.00M)
ISO 1	18.00	18.0%	15%	3.00
ISO 2	11.00	11.0%	15%	-
ISO 3	6.00	6.0%	15%	-
Industries (limit 20% = $20.00M)
Restaurants	22.00	22.0%	20%	2.00
Retail	17.00	17.0%	20%	-
Construction	9.00	9.0%	20%	-
Total excess (flows to line 3)				6.20

Worked example: Merchant 1. Balance $4.00M = 4.0% of the pool. The limit is 3%, or $3.00M. Excess = $4.00M − $3.00M = $1.00M. Only the $1.00M is removed from the base; the other $3.00M stays eligible.

What this sample shows

Merchants

1.20

ISOs / brokers

3.00

Industries

2.00

Excess concentration by type, $ millions. Total = $6.20M.

Why it matters. The ISO 1 balance ($18.00M) is only 3.0M over its limit but accounts for almost half of all excess. Concentration in one origination source is a risk the lender prices in, and a good thing to monitor before it becomes a deduction.

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HOW TO READ A BORROWING BASE CERTIFICATEVector ML Analytics

Reading the concentration schedule

Three kinds of limit. Merchants (single name), ISOs or brokers (who originated the deals) and industries. Each has its own percentage.
Only the excess drops out. Check that the agreement does not exclude the whole exposure.
Overlaps. A single loan can sit in a merchant, an ISO and an industry total. Many agreements count a loan only once (at its largest excess). Counting it three times understates the base. Confirm which way the agreement works.
Limits can be tiered. Stronger merchants or sources sometimes get higher limits. Use the table in the agreement.

Check for double counting. In this sample, Merchant 1 might also be in ISO 1 and the Restaurants group. If the agreement counts only the largest excess, the true total could be lower than $6.20M.

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HOW TO READ A BORROWING BASE CERTIFICATEVector ML Analytics

The covenant page

The certificate is usually delivered with a covenant compliance table. A pass is not the end of the story: headroom, the distance to the limit, tells you how safe you are.

Covenant	Actual	Limit	Status	How to read it
Borrowing base coverage	$10.04M headroom	≥ $0	Pass	Drawn must not exceed usable base. Cure: repay or add eligible collateral.
Delinquency ratio	6.0%	≤ 8.0%	Pass	Delinquent balance divided by gross. Distance to the limit: 2.0 points.
Minimum tangible net worth	$12.00M	≥ $10.00M	Pass	Equity less intangibles. Cure: equity injection.
Maximum leverage	4.58x	≤ 6.00x	Pass	Debt divided by tangible net worth. Check whether subordinated debt counts.
Minimum liquidity	$6.00M	≥ $5.00M	Watch	Unrestricted cash. Within about 15% of the limit, so flagged.

How to read the status

Pass: comfortably inside the limit.
Watch: inside the limit but within about 15% of it (for the borrowing base, above 90% used). This threshold is Vector’s convention; use your own early-warning policy.
Breach: outside the limit. Check the agreement for cure rights and for what happens before a default.

In this sample. Everything passes, but liquidity is $1.00M above the minimum. A single month of lower collections could take it to a breach, even while the borrowing base is healthy. Covenants and the borrowing base can fail independently.

Questions to ask about each covenant

How is it defined, and does that match how our own reports are built?
How often is it tested, and is there a right to cure with equity?
Is there a step before default (for example a cash trap)?

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HOW TO READ A BORROWING BASE CERTIFICATEVector ML Analytics

What can change next month

The sample is healthy today. This page shows how quickly availability can disappear when the pool deteriorates, even if the drawn balance does not change.

Scenario	Gross $M	Ineligible %	Eligible $M	Base $M	Availability $M	Cash to cure $M
As reported	100	10%	83.80	65.04	10.04	-
Moderate slip	95	14%	75.81	58.65	3.65	-
Severe slip	90	18%	68.22	52.58	(2.42)	2.42

Drawn balance held at $55.00M; advance rate 80%; reserves $2.00M; commitment $75.00M; excess concentrations assumed to stay at 6.2% of gross. Illustrative.

As reported

10.04

Moderate slip

3.65

Severe slip

-2.42

Availability by scenario, $ millions. A negative bar is a deficiency.

What each scenario means

As reported: $10.04M of headroom.
Moderate slip (pool 5% smaller, ineligibles up four points): headroom falls to $3.65M. No breach, but about two thirds of the cushion is gone.
Severe slip (pool 10% smaller, ineligibles up eight points): a deficiency of $2.42M. The borrower must repay that amount or fund it from cash or equity, even though no payment was missed.

Why this matters. Loans that drop out of the borrowing base are not written off; they are still on the books. But the lender no longer finances them, so the borrower’s own cash or equity must. That is why the base is monitored monthly and why headroom matters more than a single pass or fail.

Vector’s free borrowing-base calculator runs this stress test for your own figures.

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HOW TO READ A BORROWING BASE CERTIFICATEVector ML Analytics

How to review a certificate

If you are the lender or reviewer

Does the as-of date match the data?
Does gross tie to the tape and last month’s roll-forward?
Are ineligibles in every agreed category?
Is concentration excess calculated only on the excess?
Are overlaps handled the way the agreement says?
Do reserves follow the formula?
Is the advance rate current?
Does the drawn balance tie to the agent statement?
Is the certificate signed by an authorized officer?
Are covenant calculations attached?

If you are the borrower or preparer

Use the definitions in the agreement, not internal ones.
Reconcile gross to the ledger first.
Test the ineligibility rules against every loan.
Run concentrations on the same date as the pool.
Keep the workings so every line can be explained.
Check headroom before submitting, not after.
Run a stress case on the next month.
Keep a copy and the data you used.
Have a second person re-compute the base.
Flag any change in method to the lender.

Red flags

Gross receivables rise but eligible receivables do not.
The ineligible total changes sharply with no explanation.
Reserves or the advance rate change without a documented trigger.
Availability falls two months in a row.
Utilization above 90%.
A covenant in the “watch” zone while the base is also tightening.
Concentration limits breached repeatedly by the same name.

Good practice. Keep a one-page trend of eligible %, borrowing base, availability and covenant headroom for the last twelve months. Direction matters more than any single month.

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HOW TO READ A BORROWING BASE CERTIFICATEVector ML Analytics

Glossary and next steps

Term	Meaning
Advance rate	Percentage of eligible receivables the lender finances.
Availability	Amount that can still be drawn: usable base minus drawn balance.
Borrowing base	Maximum supportable borrowing after eligibility, advance rate and reserves.
Commitment	The lender’s maximum facility size.
Concentration limit	Maximum share of the pool from one merchant, broker or industry.
Deficiency	Drawn balance above the usable base.
Eligible receivable	A receivable that meets every test in the agreement.
Excess concentration	The part of an exposure above its limit.
Headroom	The distance between an actual figure and its limit.
Ineligible receivable	A receivable that fails a test and is excluded from the base.
Loan tape	The data file listing every receivable and its status.
Reserve	An amount deducted from the base for interest, fees or other risk.
Utilization	Drawn balance divided by the usable base.

Try it yourself

Borrowing Base Certificate Template (Excel): the same numbers as this sample, with formulas, schedules and covenant tests.
Borrowing base calculator: change inputs and see availability and a stress table.
Before You Sign checklist: questions to ask a lender about eligibility, concentrations and covenants.

Stop building the certificate by hand

Vector connects to your loan tape, applies your facility definitions and produces the borrowing base, schedules and covenant headroom every day. vector-cfo.com · Book a demo

Educational material, not legal, financial or credit advice. The figures, limits and advance rates in this sample are illustrative; each facility defines eligibility, reserves, concentrations and covenants in its own agreement, which governs. Have your finance and legal advisers review before using any template.

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