Glossary · Factoring
Concentration limit
Also called: Debtor concentration, Concentration cap
Definition
A concentration limit caps how much of a factor's portfolio, or of one client's invoices, can be owed by a single account debtor.
Concentration shows up at two levels. At the portfolio level, you cap total exposure to one broker across all clients, so one broker failure doesn't sink the book. At the client level, you watch how much of a single carrier's volume comes from one debtor.
If you fund through a bank line, your lender may apply its own concentration limits, so receivables above a set share from one debtor may not count toward your borrowing base. Set your internal limits below the lender's so you are never forced to stop funding a good client in the middle of a week.
Review concentrations weekly alongside days-to-pay. A large debtor that is also slowing down is where losses build. The broker credit guide covers how to set limits per debtor.