How to Structure a Borrowing Base Line of Credit

A borrowing base (BB) line of credit (LOC) is extended to customers for seasonal or permanent use of funds. Seasonal funds are usually used to finance temporary increases in accounts receivables (A/R) and inventory, and are repaid with the proceeds of the conversion of trade assets: A/R or inventory. Permanent funds are generally used for long-term increases in A/R and inventory. Repayment for permanent increases comes from the liquidation of trade assets, conversion to a term loan, or cash …