Collateral & borrowing base

Why

Lending against collateral means knowing, at every moment, what that collateral is really worth and what it authorizes financing — never an optimistic estimate, but a measured, prudent figure, traceable back to the policy and the snapshot that produced it.

How, in the application

The borrowing-base calculation engine is agnostic to the nature of the asset: it applies, in a fixed order, the exclusion of ineligible positions, a per-counterparty concentration cap, a haircut, then an advance rate — each parameter (currency, haircut, advance rate, concentration ceiling) must be explicitly defined by the bank, with no implicit default. Several sources (receivables, inventory) can be combined, provided none of them lacks rules and they share the same currency.

Valuation. An inventory asset is valued at the lower of accounting cost and the latest known market observation — never the reverse — and this retained value is never stored: it is recalculated on every request, so as never to contradict its sources. A market observation with no identified price provider is rejected: a valuation with no source is an opinion, not a fact.

An undeclared inventory lot is not excluded, it is unknown. A lot's ownership status defaults to UNKNOWN, distinct from NONE: eligibility is earned through an explicit ownership declaration, never through mere absence of objection. Declaring a lot owned is an act, not an omission presumed favorable.

Versioned policy. Each bank defines its own borrowing-base policy by asset source and by currency, as successive dated versions: opening a new version automatically closes the previous one, and it is impossible to start a version before or on the date of the one it replaces — history is not rewritten.

Frozen snapshot. Every borrowing-base calculation writes a new, complete snapshot, with the detail by source; recalculating never erases the previous snapshot. If the outstanding balance exceeds the borrowing base thus calculated, a deficiency is opened with a cure deadline (ten days by default, adjustable per bank): the clock starts at the first observation and does not restart on each subsequent update. It closes as soon as the gap disappears.

Safeguards

• No borrowing-base calculation parameter has a default value — the absence of an explicit policy blocks the calculation rather than running it on an assumption.
• There can never be two open deficiency cases simultaneously for the same facility.
• A borrowing-base snapshot is immutable once written; any change produces a new snapshot that references its originating policy and version.