Property additions and borrowing-base eligibility

Adding a valuable property to a portfolio does not necessarily increase immediate borrowing availability. The property must satisfy the facility’s eligibility and inclusion process, and the resulting borrowing base may still be constrained by concentration limits, the commitment amount, existing draws and letters of credit.

An SEC-filed LGI Homes agreement amendment dated October 9, 2026 illustrates eligibility definitions, concentration limits and borrowing-base certification. That is a homebuilder’s unsecured facility, not a standard commercial-property mortgage or a program available through this site. The model below uses invented rules to explain the mechanics without importing that agreement’s categories or advance rates.

Separate commitment, base and availability

Assume a $10 million facility commitment. Accepted eligible properties have $15 million of base value, with a hypothetical 60% advance factor, producing a $9 million borrowing base. Funded loans are $7 million and outstanding letters of credit consume another $500,000 of availability.

Available borrowing is the lesser of commitment and borrowing base, less funded loans and letter-of-credit usage:

min($10 million, $9 million) − $7 million − $0.5 million = $1.5 million

The unused headline commitment is $3 million, but only $1.5 million is currently available under the assumed base. The letter of credit is not a cash loan receipt; it nevertheless consumes capacity under this hypothetical agreement.

Model the proposed addition in stages

A proposed property has $4 million of supported value. At 60%, its unrestricted contribution would be $2.4 million. Before acceptance, its borrowing-base contribution is zero. A signed purchase agreement or completed appraisal alone does not establish that all inclusion conditions are satisfied.

If fully accepted without additional limits, the base rises from $9 million to $11.4 million. The $10 million commitment then binds, so availability rises to $2.5 million, an increase of only $1 million rather than $2.4 million.

Now assume the actual hypothetical concentration calculation allows only $800,000 of incremental base contribution from this asset. The base becomes $9.8 million and availability $2.3 million. The concentration limit is an invented result for this example, not a percentage taken from the cited agreement.

Reconcile the acquisition funding request

Suppose the purchase requires $3 million of cash, with the owner planning $2.4 million of facility borrowing and $600,000 of equity. Under the concentration-limited scenario, only $2.3 million is available, leaving a $100,000 gap. Fees, reserves and other uses would increase the requirement if present; they are excluded here only to isolate availability.

If the lender permits a simultaneous acquisition and inclusion, document exactly how the conditions are satisfied at closing. Do not assume the property can be counted before it is owned merely because the requested advance would fund the purchase. Some facilities provide a coordinated process; others require a different sequence.

A provisional worksheet should show the proposed contribution separately from the certified current base. That prevents an acquisition from being funded with availability that exists only after an uncompleted acceptance step.

Test changes to existing properties at the same time

Suppose an existing asset loses eligibility, removing $1.2 million from the base. The concentration-limited base falls from $9.8 million to $8.6 million. Before the new draw, availability becomes $1.1 million, leaving a $1.3 million shortfall against the planned $2.4 million borrowing.

If the $2.3 million draw had already occurred before the exclusion, funded loans would be $9.3 million and letters of credit $500,000, totaling $9.8 million of usage against an $8.6 million base. The resulting $1.2 million deficiency needs treatment under the actual agreement. The model does not assume a cure period, automatic waiver or right to add substitute collateral.

Maintain an eligibility and certification register

For each asset, record owner, accepted value basis, advance factor, concentration treatment, inclusion date, evidence status and conditions that could remove eligibility. Keep the calculation date and certificate version visible. An asset should not be counted twice under different categories.

Track commitment changes and lender participation separately from property values. A larger base cannot create capacity above the committed amount without an effective increase. Likewise, repayments may restore availability only if the facility permits reborrowing and other conditions remain satisfied.

The completed analysis should explain the movement from property value to accepted contribution, then to available credit and usable acquisition cash. That gives the borrower a specific funding answer instead of assuming every new asset creates borrowing capacity equal to its value times an advance rate.