A borrowing base template usually has one advance rate for accounts and one for inventory, then a list of exclusions below them. Real asset-based facilities carry two mechanics that a flat-rate template has nowhere to hold, because both resize the rate itself rather than the balance. One is a dilution trigger that cuts the AR advance rate, point for point, the moment trailing dilution crosses a threshold. The other takes the lesser of a cost-based inventory figure and one built from an appraisal the lender orders on its own schedule.
Cascade Outdoor Supply, a fictional outdoor-gear distributor, certifies against 2,220,000.00 of eligible receivables this period. Trailing dilution, measured from credit memos, rebates and write-offs against gross sales, comes in at 7.4%, 2.4 points over the facility's 5.0% trigger. One filed asset-based facility writes that excess straight into the rate: the advance rate drops from 85.0% to 82.6%, applied to the whole eligible balance rather than to any specific account. The cost is 53,280.00, and it will not appear on the aging, because every invoice behind it is still, individually, eligible.
Inventory runs the same two-track test. Cost basis of 1,600,000.00 at a 60% advance rate reads 960,000.00. Levi Strauss's own asset-based revolver takes the lesser of that figure and a rate against Net Orderly Liquidation Value, a number a field examiner sets from an appraisal rather than the books. This period's appraisal puts NOLV at 68% of cost; the resulting 924,800.00 binds lower, giving up 35,200.00 nobody would find by re-checking the count. A full covenant set alongside a base belongs with the lender reporting package; a clause-by-clause calculation is the covenant definition extractor.
Eligible AR