Customer concentration
When most receivables come from just one or a few customers.
Why it matters
High concentration in one customer increases the impact of any single credit event on the entire factoring program. If a dominant customer becomes ineligible, disputes a large invoice, or files for bankruptcy, the resulting funding restriction or chargeback can be disproportionate to what the factor initially approved. Concentration limits protect the factor by ensuring no single debtor represents too large a share of the funded receivables pool. Sellers with concentrated customer bases may need to find a factor with higher concentration tolerance, or negotiate specific concentration waivers for key customers.
How it appears in contracts
Concentration limits appear in the Eligible Receivables or Program Terms section of the factoring agreement. Common limits: no single account debtor may represent more than a specified percentage, often 20 to 25 percent, of the outstanding funded receivables at any time. Invoices that would push a debtor over the concentration limit are ineligible until other invoices from that debtor are collected. Some agreements permit concentration waivers for specific approved debtors, particularly for programs serving businesses with a small number of large customers.
Related terms
Related reading
Sources
- International Factoring Association - International Factoring Association. Accessed 2026-05-19.
- Secured Finance Network - Secured Finance Network. Accessed 2026-05-19.