Borrowing Base


DEFINITION of 'Borrowing Base'

The amount of money a lender will loan to a company based on the value of the collateral the company pledges. The borrowing base is usually determined by a method called margining, where the lender determines a discount factor that is multiplied by the value of the collateral; the result is the amount that will be loaned to the company.

BREAKING DOWN 'Borrowing Base'

For example, if company X goes to a lender to borrow money, the lender will assess the company's strengths and weaknesses and evaluate the lender's risk. Based on the risk the lending company feels is associated with lending money to company X, a discount factor is determined, say 85%. If company X is offering collateral that is worth $100,000, the amount the lending company will give the company is equal to 85% of $100,000, or $85,000.

  1. Collateralized Borrowing And Lending ...

    A money market instrument that represents an obligation between ...
  2. Collateral

    Property or other assets that a borrower offers a lender to secure ...
  3. Collateralization

    The act where a borrower pledges an asset as recourse to the ...
  4. Additional Collateral

    Additional assets put up as collateral by a borrower against ...
  5. Collateral Trust Bond

    A bond that is secured by a financial asset - such as stock or ...
  6. Remittance

    The term most commonly refers to money being sent via mail or ...
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