What are some common underwriting characteristics of revolving lines of credit in which a borrowing base sets the availability of funds?
A borrowing base is a lending condition incorporated into many revolving credit agreements that limits the institution’s legally binding commitment to advance funds to the borrower. The borrowing base specifies the maximum amount the institution will lend to the borrower as a function of the collateral’s type, value, eligibility criteria, and advance rates. The credit agreement also specifies a maximum commitment amount regardless of the amount of the borrowing base availability.
