Device master record: the recipe somebody else has to follow
The DMR is what a competent stranger would need to build the device correctly. If it points at documents that no longer exist at that revision, it is not a recipe.
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Borrowing base certificate: the number the lender actually funds against
A borrowing base certificate is a periodic calculation, not a report. The eligibility rules that shrink the collateral pool are where most of the work lives.
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A borrowing base certificate is the periodic statement a borrower gives its lender showing how much collateral currently supports an asset-based facility, and therefore how much the borrower is allowed to draw. It takes the raw balances — receivables, inventory, sometimes equipment — strips out everything the credit agreement declares ineligible, applies the advance rates, subtracts reserves, and arrives at one number: availability.
It is a calculation, not a narrative. The certificate is usually due monthly, sometimes weekly during a tight period, and the lender funds against the figure it produces. A late or wrong certificate is not a paperwork problem — it either blocks a draw or, worse, means money was advanced against collateral that was never eligible.
What goes into a borrowing base certificate
- Gross accounts receivable as of the determination date, tied back to the ledger.
- Ineligible receivables removed: past the aging cutoff, cross-aged customers, contra accounts, intercompany, foreign or government obligors, concentration above the permitted percentage.
- Eligible receivables multiplied by the advance rate stated in the credit agreement.
- Eligible inventory at cost or NOLV, with its own advance rate and its own exclusions — consigned, in transit, slow-moving, work in progress.
- Reserves the lender has imposed: dilution, rent, taxes, accrued payroll.
- Less outstanding loans and letters of credit, giving net availability.
The exclusions are the substance. Anyone can multiply a receivables total by eighty-five percent; the discipline is in proving that the total being multiplied has already had the ineligible items taken out, and that the aging behind it matches what the accounting system says.
Why the certificate breaks
Most bad certificates come from the same three places. The aging report is pulled on a different date than the balance being reported. Credit memos issued after the cutoff are not reflected, so receivables are overstated. And concentration limits are applied to last quarter’s customer mix rather than this month’s.
None of these are arithmetic errors. They are reconciliation failures — the same class of problem as a bank reconciliation that balances only because a difference was plugged. If the certificate cannot be tied line by line to the subledger it was drawn from, it has not been prepared, it has been estimated.
Keep the supporting aging, the inventory listing and the reserve calculation with the certificate, not in a separate folder. When a field examination arrives, the question is never what the number was — it is what the number was built from.
Building it so it survives the next month
- Write the eligibility rules out of the credit agreement once, in plain language, next to the calculation that applies them.
- Fix the determination date and pull every input as of that date — aging, inventory, loan balance, letters of credit.
- Compute ineligibles as a visible deduction schedule, never as an adjustment inside a single cell.
- Apply advance rates and reserves in that order, then subtract outstandings.
- Have the person who prepared it and the officer who signs it be different people.
- Archive the version that was actually sent, with its supporting schedules attached.
A borrowing base certificate is a spreadsheet problem with a legal deadline attached, which is why the calculation belongs somewhere versioned rather than in a file passed around by email. Ettex Sheets holds the schedule, the deduction workings and the month-over-month history in one place, so the certificate sent to the lender and the workings behind it never drift apart.
Where it fits in the monthly cycle
The certificate depends on numbers that the finance team is already producing. The receivables aging comes out of the same process as credit control; the payables side feeds the reserves; and the whole thing is only as timely as the month-end close that produces the balances. Teams that treat the certificate as a separate exercise rebuild the same data twice and reconcile it never.
Frequently asked
How often is a borrowing base certificate due?
Whatever the credit agreement says — typically monthly, within ten to twenty days of month end, with weekly or daily reporting triggered if availability falls below a threshold or an event of default occurs.
Who signs it?
An authorised financial officer, usually the CFO or controller. The signature is a representation that the figures are true and that the eligibility criteria in the credit agreement were applied.
What happens if the certificate shows an overadvance?
The facility is out of formula. Most agreements require immediate repayment of the excess, and repeated overadvances are themselves a default even when cured.
Is the borrowing base the same as the credit limit?
No. The limit is the maximum facility size; the borrowing base is what the collateral currently supports. The borrower can draw the lower of the two.
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