Eligible receivable
An invoice that passes all the factor's eligibility tests and can be funded. Many invoices that are real and owed can still be ineligible under program rules.
Why it matters
The eligible receivable criteria in the contract determine what percentage of total receivables can actually be funded. Many sellers discover that a significant portion of their invoices fall outside eligibility criteria after signing the agreement. Typical exclusions reduce the fundable pool: invoices older than 90 days, government customer invoices in some programs, retainage and pay-when-paid invoices, invoices from related parties, cross-aged invoices, and invoices exceeding the credit limit for individual account debtors. Reviewing the eligibility definition against the actual customer and invoice mix before signing prevents surprises.
How it appears in contracts
The Eligible Receivable definition is typically one of the most detailed sections of a factoring agreement, often spanning several paragraphs. It defines both the characteristics an invoice must have to qualify and the characteristics that make an invoice ineligible. When a funded invoice later becomes ineligible, the seller is typically required to repurchase or replace it. The definition should be read alongside the Chargeback and Default sections to understand the full consequence of ineligibility arising after an invoice has already been funded.
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.