Concentration limit

A limit on how much of the funded receivable pool can come from one customer. Once that customer represents more than the allowed percentage, additional invoices from them may not be funded.

Why it matters

Businesses that rely heavily on one or two large customers hit concentration limits frequently. This reduces available funding even when those customers are creditworthy and paying on time. If a dominant customer relationship is central to the business model, ask prospective factors about their concentration policy and whether exceptions can be made for specific high-credit debtors.

How it appears in contracts

Concentration limits appear in the 'Eligible Receivable' definition or a dedicated 'Concentration' section. The typical structure specifies a percentage threshold—for example, 'no more than 25% of the funded portfolio may be owed by a single account debtor'—and states what happens when that threshold is reached. In most agreements, invoices exceeding the concentration limit are not funded; they sit ineligible until other invoices bring the concentration back within bounds. Some agreements include a schedule of individual debtor credit limits as an exhibit, which effectively applies customer-level caps independent of the concentration percentage. Ask for this schedule before signing if you have large individual customers.

Related terms

Related article: What is invoice factoring?

Related reading

Sources

  • International Factoring Association - International Factoring Association. Accessed 2026-05-19. Industry association source for factoring terminology and industry context.
  • Secured Finance Network - Secured Finance Network. Accessed 2026-05-19. Industry education source for secured finance and asset-based lending context.
Financial disclaimer. This page is educational only and is not financial, legal, tax, accounting, or credit advice. Factoring terms vary by provider and contract. Read the full disclaimer.