Concentration Limit Calculator
See how much of a single debtor's balance is eligible under a concentration cap, and how much excess is removed from the borrowing base.
How concentration limits work
A concentration limit caps how much of a borrowing base any single account debtor can represent. The cap is the eligible pool times the limit percentage. Any amount a debtor holds above that cap is concentration excess, which becomes an ineligible receivable and is removed from the pool before the advance rate is applied.
Concentration is one eligibility check in a borrowing base. Keep payment records and exceptions available for your portfolio review.
Frequently asked questions
What is a concentration limit in factoring and ABL?
A concentration limit caps how much of a borrowing base any single account debtor can represent, usually as a percentage of the eligible pool. It protects the lender from over-exposure to one debtor, so the failure of a single customer does not take down a large share of the collateral. Common limits run in the 15 to 25 percent range, though they vary by debtor credit quality and portfolio.
How is concentration excess calculated?
Multiply the eligible accounts receivable pool by the concentration limit percentage to get the cap. If a single debtor's balance is above that cap, the amount above it is the concentration excess, which is treated as ineligible and removed from the borrowing base before the advance rate is applied.
How does concentration affect the borrowing base?
Concentration excess is one of the ineligibles subtracted from gross receivables to get the eligible pool. A book concentrated in a few debtors loses availability to concentration caps, while a diversified book keeps more of its receivables eligible. It is one reason lenders favor a spread of creditworthy debtors.
Can the concentration limit differ by debtor?
Yes. Lenders often set a higher limit for highly rated or government debtors and a lower one for weaker credits, and may set special limits for specific accounts. This calculator uses a single limit to show the mechanics; a real facility can apply several.
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