Report

Pitfalls in Borrowing Base Transactions

 
An "asset based" loan is often for a shorter period than a "term" loan and is secured by a borrower's assets. The loan may be backed by a single category of assets or some combination of assets. Inventory (including raw material and work in process) and proceeds (accounts receivable, chattel paper and instruments) often form the primary collateral for such loans. Real estate and equipment are less likely to be employed to secure such loans.

I. Introduction
II. Mechanics of a borrowing base
A. Introduction
B. Advances, payments and collections
C. Advances.
D. Payments and collections.
III. Legal and related structural considerations
A. Creating and perfecting the security interest
B. Fraudulent transfers
C. Effect of bankruptcy.
Annex I - Annotated Samples of "Eligible Accounts" and "Eligible Inventory" Language
Annex II - Sample borrowing base certificate
Annex III - Article 9 Uniform Provisions (UCC §§ 9-104, 9-312 & 9-314) Related to Perfection of Security Interests in Deposit Accounts
About the Author

Faculty

Lawrence R. Ahern, III

Lawrence R. Ahern, III

Brown & Ahern Attorneys at Law