Jurisdiction(s):
United Kingdom

Key definition

Working Capital definition

What does Working Capital mean? In legal practice, working capital describes the liquid resources a business needs to fund its general operating requirements, usually calculated as current assets minus current liabilities (net working capital). It is not defined by statute or case law in England & Wales, Scotland, Northern Ireland or Ireland; it is an accounting and commercial concept, typically defined in contracts. Typical components include trade receivables and inventories less trade payables and accruals. Share purchase agreements, loan agreements and facility agreements frequently tailor the definition by including or excluding items such as cash, debt, tax, intercompany balances and exceptional or non‑recurring items. - M&A: purchase...

Borrowing Base Facilities in Trade and Commodity Finance: Eligibility, Calculation, Reporting, Lender Risks and Cross-border Security; LMA 2026 and Electronic Trade Documents Act 2023 Updates

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Practice notes

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What is a borrowing base facility?

Borrowing base facilities (‘BB Facilities’) are a form of trade finance. They are working capital arrangements that provide short-term liquidity either through advances or by issuing trade instruments, such as letters of credit (see: Letters of credit—overview) or on demand guarantees (see: On demand guarantees/bonds—overview). These facilities are fully secured against current assets—commonly trading receivables, inventory (i.e. goods in storage or in transit), cash and contractual rights—of the borrower and/or other security providers. Consequently, the borrower’s available capital at any given time is directly linked to the value of the assets securing the lender(s).

BB Facilities are typically offered to trading companies on a revolving basis to fund the purchase, storage, transport and sale of prescribed commodities. They are often used to finance a pool of traded assets subject to high price volatility. Reflecting this, a standard borrowing base facility agreement will include provisions focused on those assets and their valuation. A typical BB Facility has a tenor of 1–2 years, although extensions are also common...

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Web page updated on 21/05/2026

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