What is a borrowing base certificate, and where does a license receivable fit?

What is a borrowing base certificate?

A borrowing base certificate is a signed report, usually monthly and sometimes weekly, that tells an asset-based lender how much collateral supports the revolver. The borrower lists accounts receivable and inventory, removes what the credit agreement calls ineligible, applies advance rates and arrives at availability.

Sample credit agreements typically tie delivery to a deadline after month-end, a responsible officer's signature and supporting schedules such as agings. The exact wording is in your client's agreement, and it controls. The sample clause pages at Law Insider show how common the structure is, but they are examples, not your client's terms.

How does the certificate get built each month?

1. Pull the receivables aging at the cutoff date and tie it to the general ledger.
2. Remove ineligible items using the agreement's definitions.
3. Apply the advance rate to the remaining eligible balance.
4. Do the same for inventory, if inventory is in the base, using the appraised or cost basis the agreement specifies.
5. Subtract reserves, then compare the result with the facility cap and outstanding loans.
6. Have the responsible officer sign, attach schedules and send it within the agreed window.

Lenders may also run field exams to test that the numbers match the books; the SFNet field exam training page shows this is a discipline of its own.

Why might a license receivable be ineligible?

Common eligibility criteria describe trade receivables from the ordinary sale of goods or services to unrelated customers. A one-time data license can differ from that picture in several ways, which is why a conservative CFO will not assume it counts.

Treat this table as a prompt for questions, not as a statement about any particular facility.

How should a CFO plan around it?

The conservative rule is to leave a prospective license out of availability until the lender has agreed in writing. Cash planning can include the possible payment once it is probable, but the revolver forecast should not depend on it.

Before anything is signed, the CFO can raise three points with the lender's relationship manager: whether an exclusive license of operational records needs notice or consent, whether the proceeds are treated as a prepayment event, and how the covenant compliance certificate should footnote one-time income. Where the borrower's runway is thin, the related question is how an unsigned deal should be described in management's plans; see going concern management plans.

Which clients are likely to have both an ABL and licensable records?

ABL borrowers are usually distributors, manufacturers, staffing firms and service businesses with real receivables, which overlaps with the companies SourceX is built for. A client with 50+ full-time employees at peak (contractors excluded), years of records across many systems and a lender-reporting routine is a candidate. You can check headcount history against the headcount planning template and run the company fit checker. The fractional CFO guide for e-commerce brands shows the same screen applied to one segment.

What does the certificate not tell the lender?

The certificate reports collateral, not strategy. It does not require the borrower to describe pipeline opportunities, and a CFO should not add speculative items to it. Keep prospects in the forecast or the management commentary the agreement asks for, labelled clearly, and keep the certificate limited to what the definitions allow. If the lender asks about unusual cash in a later period, a one-page note with the contract date, the payment trigger and the treatment you applied answers most questions.

What happens in the license process, step by step?

1. The partner introduces the company.
2. SourceX qualifies it on size, history, breadth and rights.
3. The company completes a data inventory.
4. Price and terms are agreed; nothing is binding until signed.
5. Buyers review, then the deal closes and data is delivered.
6. The company receives one all-in payment, typically within about 60 days of invoicing once the buyer selects the data.

The partner never handles records. This is general information, not legal, tax or financial advice. Confirm with your client's lender and counsel before acting.

What should the CFO ask the lender before any license is signed?

• Does the definition of Eligible Account exclude non-trade or contingent receivables, and does it say anything about intellectual property licenses?
• Is there a single-account or single-obligor concentration cap, and what is the buyer's credit standing under it?
• Does an exclusive license trigger a negative covenant, a consent right or a mandatory prepayment?
• Will the lender want notice, and how far ahead of signing?
• Who at the lender decides, the relationship manager, the agent or a credit committee?

Keep the answers in writing and file them with the certificate workpapers. If the lender agrees to treat part of a receivable as eligible, record the exact wording and the date, because field examiners test the base against the agreement as amended. A short email thread is usually enough, but an amendment letter is better when real availability depends on it.

Two common mistakes are worth naming. The first is counting a signed but unbilled license in the base because the contract exists; billing and earning triggers decide eligibility, not the signature. The second is forecasting availability from the license and then drawing on it before cash arrives, which can leave the borrower over-advanced if the receivable is excluded at the next certificate.

How rewards work for a CFO who introduces a client

Partners earn 25% of the eligible platform fees SourceX actually collects from the referred company's licensing deals, capped at $100,000 cumulative per referred company. The reward is paid only after the buyer pays and SourceX receives its fee, it is never deducted from what the company receives, and no reward is guaranteed. If you hold a CPA license, check your firm's and state board's rules on referral fees first. The program terms set out the details, and the referral opportunities for fractional CFOs page covers the role.

Next step

If a client has a revolver and records worth screening, register as a partner and make the introduction, or point the owner to sourcex.si/apply. Firms building a wider advisory practice can read the CAS growth overview.