Definition
A cap on how much of a facility can be tied to a single customer.
Why it matters
Funders set concentration limits to manage the risk of one large customer not paying.
Where it shows up in a deal
The limit is written into the eligibility definitions of the agreement, usually as a percentage of total eligible receivables that any one account debtor may represent. It is applied every time availability is recalculated, which means it bites hardest in the months when your biggest customer is also your busiest.
What it affects
- The excess over the cap is carved out of eligibility, not funded at a lower rate.
- A cap can be raised for a specific debtor where credit insurance or an estoppel letter supports it.
- Winning more work from your largest customer can reduce availability rather than increase it.
- Government and investment-grade buyers often receive higher caps than mid-market ones.
A worked example
On a $900,000 eligible ledger with a 20% cap, any one buyer may represent $180,000. A buyer owing $340,000 contributes only $180,000 of eligible value; the $160,000 excess is carved out, which at an 85% advance costs $136,000 of availability.
The common mistake
Related terms
- Eligible ReceivablesInvoices that meet a funder's criteria for advancing.
- Borrowing BaseThe maximum amount available under an asset-based line, calculated from eligible collateral.
- DebtorIn factoring, the customer who owes payment on the invoice.
- Credit InsuranceInsurance that protects a seller against customer non-payment.
Questions about how concentration limit affects your facility?
Call (929) 658-8087 or request a written quote — no obligation, no credit impact.
