Borrowing Base Loan Agreement

Credit facilities are a kind of financing structure for commodity producers, which allows a company to mortgage part of its assets to a lender. The value of this pool of assets, called a “credit base,” will represent the amount of cash loans. It`s easy to understand why lenders like to use a credit base. They`re protected. But what about borrowers? Your particular lender could define your credit base based on the type of assets you offer. The various units (or “preliminary interest rates”) of the exposures and stocks are included in the credit base. Typical industrial standards are 75-85% for receivables[1] [1] [1] and 25-60% for inventories[7], and prices in advance can vary considerably depending on the circumstances. [1] If you are not a well-established company, the guarantee of a traditional small business credit can be a fierce struggle. They have no evidence of profitability or a long source of income. And if your personal credit score isn`t stellar, that may be another obstacle. For whom is wealth-based credit good? You guessed it: businesses and small businesses. As of March 31, 2016, Cabot Oil and Gas Corporation had no outstanding credit under its revolving credit facility. Since then, on the first day of April each year, the credit base has been redefined, although the lender is free to request a redefinition when Cabot buys or sells oil and gas properties.

On April 19, 2016, the credit base was reduced from $3.4 billion to $3.2 billion. Technology companies come to us for long-term loans that can help them recruit new employees, grow and invest in software. The borrower must also provide the lender with certain information used to determine the credit base, including sales, collection and inventory data. With respect to mid-market loans and large assets, borrowers are often required to regularly provide certificates to lenders that reveal different details of business relationships. The certificate can, for example. B, break down a company`s authorized receivables if the credit base is determined by that counterparty. Second, the credit company will be subject to the lender`s control over collateral. The lender must regularly monitor collateral, for example.

B cash or invoices, in order to guarantee its condition. In addition, the borrower may be forced to submit reports on the status of the guarantee. Sometimes the lender has to withdraw some of the company`s collateral when the credit base declines sharply. As a result, the availability of the loan can be monitored on a daily basis, so that this financing structure adapts to the exact situation of the credit company and thus provides flexibility and greater security for the lender. A credit base is the amount a lender is willing to lend to a business based on the value of the collateral the entity lends. The credit base is usually determined by a method called margining in which the lender determines a discount factor, which is then multiplied by the value of the collateral involved. The resulting number of numbers is the amount a lender will lend to the business. They need money, space to grow, and we can offer it. A temporary loan could help you deal with a single expense such as a website project. A stock line of credit could help you pay your suppliers or cover operating costs. Another potential benefit for the borrower? Interest rates on loans backed by credit-backed assets tend to be lower than those on unsecured loans.

Different assets can be used as collateral, including receivables, inventory and equipment. When a business goes to a lender to borrow money, the lender assesses the lender`s strengths and weaknesses. Based on the perceived risk that the credit company associates with the credit money to that company, a discount factor is then determined – say 85%.