Borrowing Base Certificate
(Asset-Based Loan Agreement)

Summary

This template is a borrowing base certificate attached as an exhibit to an asset-based loan agreement. This template includes practical guidance and drafting notes. This certificate shows the calculation of the borrowing base used in the underlying loan facility. Therefore, the starting point in drafting the form is the definition of borrowing base in that agreement. The elements of that definition comprise each of the line items of the borrowing base certificate: eligible accounts, eligible inventory, and any other assets that are permitted to be included in the borrowing base (such as real property, intellectual property or equipment). Finally, these amounts are multiplied by the applicable advance rates, also found in the borrowing base definition, to arrive at the borrowing base. See Borrowing Base Definition (Asset-Based Loan Agreement). The borrower must complete the form and deliver it periodically to the lender (or to the agent on behalf of the lenders). Typically, the frequency of delivery is tied to the credit-worthiness of the borrower or the amount of excess availability in the borrowing base, with shorter time frames (such as weekly) imposed on more distressed borrowers or where there is little headroom in the borrowing base (that is, where there is a smaller gap between the amount of loans outstanding and the amount that may be borrowed). However, monthly delivery is most common for borrowers with adequate liquidity. In addition, a recalculation of the borrowing base and delivery of the certificate must sometimes be provided by the borrower with any borrowing request (to ensure that such borrowing does not result in a borrowing base deficiency). While an authorized officer of the borrower certifies as to the accuracy of the information in the borrowing base certificate, the lender or administrative agent verifies this information through its audit, appraisal, and inspection rights, as provided in the loan agreement. Further, the lender or the administrative agent should already be apprised of the receivables tally from the borrower's more frequent reporting of sales and collections. See the practice note Reporting Requirements, Field Examinations, and Appraisals. This certificate uses capitalized defined terms and is required to be delivered pursuant to an underlying credit agreement. As such, conform the capitalized terms to defined terms in the relevant credit agreement. Read in conjunction with the practice notes Eligibility Criteria, Inventory and Equipment Borrowing Eligibility Criteria and Accounts Receivable Eligibility Criteria. See also Eligible Account Definition (Asset-Based Loan Agreement), Eligible Inventory Definition (Asset-Based Loan Agreement) and Eligible Equipment Definition (Asset-Based Loan Agreement). For a list of key resources covering major energy-related topics, see Summer Associate Resource Kit: Energy & Utilities. For a full listing of key content covering fundamental energy and utilities related topics, see Energy & Utilities Fundamentals Resource Kit. For a full listing of key content covering asset-based lending, including agreements, security, guaranties, perfection, and priorities, see Asset-Based Lending Resource Kit.