Borrowing base certificate

The borrowing base certificate (BBC) is the single most important document you produce each month. It determines how much capital you can access and certifies your compliance with portfolio covenants.

What the BBC contains

A standard BBC walks through the calculation:

Total pool balance: Aggregate unpaid principal balance of all receivables
Ineligible deductions: Receivables that fail eligibility criteria
Excess concentration deductions: Amounts exceeding concentration limits
Net eligible balance: Total pool minus deductions
Advance rate application: Net eligible balance times advance rate
Reserve deductions: Spread account, liquidity reserve, etc.
Borrowing base: Final amount available to borrow
Current drawn amount: Outstanding facility balance
Availability: Borrowing base minus drawn amount

Worked example

Here is how a $100M pool turns into borrowing capacity:

Line Item	Amount	Notes
Total Pool Balance	$100,000,000
Less: Ineligible Receivables
- Past due 60+ days	($1,200,000)	Eligibility requires current or 30 DPD
- Missing documentation	($500,000)	File deficiencies
- Exceeded loan size cap	($800,000)	Max $50K per loan
- Matured loans	($200,000)	Past final payment date
Less: Excess Concentrations
- State concentration (CA >15%)	($1,500,000)	CA is 18.5%, deduct excess
- Single obligor	($0)	None exceed 2% limit
Net Eligible Balance	$95,800,000
Advance Rate	85%
Gross Borrowing Base	$81,430,000
Less: Reserves
- Spread account (2% of pool)	($2,000,000)
Net Borrowing Base	$79,430,000
Current Drawn Amount	($72,000,000)
Excess Availability	$7,430,000	Room to draw

The preparation process

Step 1: Extract the tape

Pull your loan-level data as of the calculation date. This typically comes from your loan management system or servicing platform. You need:

Current balance for each loan
Payment status (current, 30 DPD, 60 DPD, etc.)
All fields needed for eligibility testing
All fields needed for concentration testing

Step 2: Run eligibility tests

Each loan must pass all eligibility criteria to be included. Common tests:

Originated within guidelines
Not past due beyond threshold (typically 60+ days)
Complete documentation
Within loan size limits
Within remaining term limits
No material covenant breach

Flag every ineligible loan and categorize by reason.

Step 3: Calculate concentrations

For each concentration limit, calculate your current exposure:

Geographic (by state, top 10 states, single state max)
Obligor/borrower (for commercial loans)
Product type or loan program
Credit tier or score band
Industry (for commercial)

Any amount exceeding the limit gets deducted from the eligible pool or haircut at a penalty rate.

Step 4: Reconcile to prior period

Compare to last month’s BBC:

Pool balance change (additions, payoffs, charge-offs)
Eligibility changes (loans becoming ineligible, curing)
Concentration changes

Lenders will ask about material changes. Have the explanation ready.

Step 5: Apply advance rate and reserves

Multiply the net eligible balance by your advance rate. Deduct any required reserves. This gives you your borrowing base.

Step 6: Prepare certificate and supporting schedules

The BBC itself is typically a 1-2 page form with summary numbers. It is accompanied by supporting schedules showing the detail. You sign it as an officer of the originator, certifying accuracy.

Common BBC errors

Stale data

Your tape is as of month-end, but you are submitting 15 days later. Make sure the numbers reflect the calculation date, not the submission date.

Eligibility misclassification

A loan that is 61 days past due should not be in your eligible pool. Automate this testing so human judgment does not introduce errors.

Concentration miscalculation

You calculated California concentration at 14.8%, but you forgot about the loans you added last week. Concentrations can move faster than you expect.

Missing deductions

You have a $2M loan against a 2% obligor cap. You need to deduct the $300K excess, not count the full $2M in the eligible pool.

Certification without review

You sign the BBC certifying accuracy. If it is wrong, you have made a misrepresentation. Actually review the numbers before you sign.

BBC automation priorities

The BBC is high-frequency, high-stakes, and error-prone when done manually. Automate:

Eligibility testing - Rule-based checks against all criteria
Concentration calculations - Real-time concentration tracking
Reconciliation - Automated comparison to prior period
Certificate generation - Template-based document production

Most originators find that BBC automation pays for itself within the first year through reduced errors and time savings.

Reporting requirements - Full reporting calendar
Covenant compliance - Testing portfolio and financial covenants
Ongoing reporting and surveillance - Overview of reporting and surveillance