Margin Calls in Commercial Lending: What Businesses Need to Know
Content
In commercial lending, credit availability often depends on the value of a company’s collateral—things like accounts receivable, inventory, or equipment. But what happens when that collateral drops in value? That’s when margin calls come into play.
A margin call is a lender’s safeguard against unexpected risk, but for borrowers, it can create sudden pressure on cash flow. For U.S. businesses that rely on asset-based lending or revolving credit facilities, understanding margin calls is critical to keeping funding stable.
What Is a Margin Call in Commercial Lending?
A margin call happens when the value of collateral backing a loan falls below the lender’s minimum coverage requirements. To restore that coverage, the borrower must:
- Pledge additional collateral, or
- Pay down part of the loan balance.
Think of it as a lender saying: “Your collateral no longer covers our risk—make up the difference.”
Why Do Margin Calls Happen?
Margin calls are triggered when collateral weakens or when markets shift. Common reasons include:
- Declining Collateral Value
Accounts receivable past due beyond 90 days may no longer qualify as collateral. Inventory values may drop due to market price shifts. - Borrowing Base Adjustments
In U.S. asset-based lending, facilities are tied to a “borrowing base”—a percentage of eligible receivables or inventory. If eligibility shrinks, available credit falls, sometimes triggering a margin call. - Market Volatility
In April 2025, margin call activity spiked 35% in the U.S. derivatives market due to tariff-driven volatility (Reuters). While that’s a capital markets example, the same principle applies: when asset values shift quickly, margin demands rise. - Covenant Breaches
Falling short of agreed financial covenants (like leverage or liquidity ratios) may lead to margin calls or repayment demands.
Margin Calls in Action
Example 1: Accounts Receivable Financing
A Texas-based staffing agency has a $6 million line secured by receivables. If $750,000 worth of invoices roll past 90 days, the borrowing base shrinks, and the lender issues a margin call requiring repayment or additional collateral.
Example 2: Inventory Financing
A distributor in California finances its warehouse stock. When wholesale prices drop sharply, the inventory’s value falls below advanceable levels. The lender demands repayment or the pledge of additional assets.
The Impact on Businesses
Margin calls aren’t punitive—they’re part of standard risk management. Still, they can create serious stress:
- Liquidity Strain: Unplanned repayments can jeopardize payroll or vendor payments.
- Collateral Pressure: Companies may lack spare assets to pledge.
- Operational Risk: Missed margin calls can freeze lines of credit or trigger defaults.
During the 2020 pandemic, for example, U.S. businesses faced widespread liquidity stress as collateral values shifted and margin requirements increased almost overnight.
How U.S. Businesses Can Prepare
- Track Collateral Quality
Regularly monitor receivables aging and inventory valuations. - Maintain Cash Buffers
Keep reserve liquidity or secondary credit lines to respond quickly. - Diversify Collateral
Using receivables, inventory, and equipment spreads risk across asset classes. - Run Stress Tests
Model scenarios like a 30–40% jump in margin requirements to test preparedness. - Stay Proactive with Lenders
Open communication often leads to more flexibility and better outcomes during market shifts.
Conclusion
Margin calls are more than a technical detail in commercial lending—they’re a direct reflection of how closely financing is tied to the strength of your collateral. For lenders, margin calls are a standard risk management tool. For U.S. businesses, however, they can feel like sudden financial pressure points that disrupt daily operations if not anticipated.
The key takeaway is that margin calls aren’t inherently negative—they’re signals. They indicate that market conditions, collateral quality, or financial covenants have shifted, and that it’s time to rebalance. Businesses that treat margin calls as a built-in feature of their financing strategy—rather than as an emergency—are better positioned to stay resilient.
By monitoring collateral values, keeping liquidity buffers, diversifying pledged assets, and engaging proactively with lenders, companies can transform margin calls from disruptive events into manageable checkpoints. In fact, businesses that integrate margin call preparedness into their financial planning often report stronger lender relationships, more flexible access to credit, and fewer disruptions during volatile cycles.
In today’s lending environment—where supply chains remain fragile, interest rates are still elevated, and markets can turn quickly—margin call readiness should be viewed as part of a broader risk management strategy. The businesses that succeed will be those that expect the unexpected, plan for it, and keep their financing structures strong enough to weather short-term shocks while staying focused on long-term growth.
ABOUT eCapital
At eCapital, we accelerate business growth by delivering fast, flexible access to capital through cutting-edge technology and deep industry insight.
Across North America and the U.K., we’ve redefined how small and medium-sized businesses access funding—eliminating friction, speeding approvals, and empowering clients with access to the capital they need to move forward. With the capacity to fund facilities from $5 million to $250 million, we support a wide range of business needs at every stage.
With a powerful blend of innovation, scalability, and personalized service, we’re not just a funding provider, we’re a strategic partner built for what’s next.
Bruce Sayer
Bruce is a seasoned content creator with over 40 years of experience across various industries. Since 2013 he has been a dedicated member of the eCapital team, publishing informative articles intended to introduce and guide business leaders through effective financing options.
During this time, Bruce's articles have influenced countless of CEOs and other executives to investigate and often implement specialized funding strategies to achieve stable and flexible financial structures.
