An asset-based line of credit’s limit isn’t fixed — it moves every reporting period with the business’s actual eligible collateral, which is why it’s called a borrowing base rather than a loan amount.
How it works
Eligible accounts receivable and eligible inventory are each multiplied by their own advance rate (AR typically advances at a higher rate than inventory) and summed to get the borrowing base. Subtracting whatever’s already drawn shows what’s still available.
What this does not include
Not all receivables or inventory count as “eligible” — aged, disputed, or concentrated receivables and slow-moving or obsolete inventory are commonly excluded by the lender’s own eligibility criteria, which this calculator takes as a given input rather than determines.
How to use this calculator
- Enter eligible accounts receivable and its advance rate.
- Enter eligible inventory, its advance rate, and the amount already drawn.
Frequently asked questions
Why does inventory usually advance at a lower rate than AR?
Because inventory is harder to liquidate quickly at full value if the borrower defaults — receivables convert to cash more predictably, so lenders extend more credit against them.
What happens if the business is “out of formula”?
When available credit goes negative — the amount drawn exceeds the current borrowing base — the borrower is typically required to pay down the line immediately to get back in formula.
How often does the borrowing base get recalculated?
Often monthly, based on updated eligible collateral reports the borrower submits — which is why the available credit can change significantly between reporting periods.
