Why do small businesses need a borrowing base certificate?

A bank may ask a small business owner to complete a borrowing base certificate so the lender can calculate the value of the company’s collateral and determine how much credit it is willing to extend to the business. The certificate includes the company’s assets such as plant, property, equipment, inventory, cash on hand, and accounts receivable.

What is a borrowing base?

A borrowing base is typically used for asset-based loans. If you’re in the market for this type of loan, you can check out Clarify Capital. It is a broker with more than 75 lenders in its network and can issue $750,000 or more in funding in as little as 24 hours. Visit Clarify Capital Below are two examples of how to calculate borrowing base.

What is a borrowing base certificate?

The borrowing base certificate is important paperwork that lists the applicable asset and its assessed value and will show the advance rate being used in the calculation of the borrowing base. Lenders may issue a certificate to document the type and collateral being used for your loan.