Questions about funding concentration limits

A large new client changes the shape of an agency's ledger. Before assuming that every new invoice will support the same funding availability as the existing book, ask the provider how the proposed facility treats customer concentration and individual debtor exposure.

There is no percentage in this checklist that should be treated as a standard market limit. The relevant definitions, calculations and permissions come from the actual facility and its provider. The aim is to obtain an explanation you can reconcile to your own forecast.

Establish the calculation before using it#

Ask the funder which balance it uses to measure concentration, which customers it groups together and when the calculation is refreshed. Confirm how disputed, overdue or otherwise ineligible amounts interact with that calculation. A percentage is difficult to interpret without its denominator and exclusions.

The British Business Bank's invoice-finance guidance explains that providers assess the business and debtor book using their own risk criteria. Use your provider's written explanation for the specific concentration treatment rather than relying on a general product description.

Questions for the funding discussion#

• How is a customer or connected customer group defined for this facility?
• Which ledger balance forms the basis of the concentration calculation?
• Is there an individual debtor limit as well as a concentration restriction?
• What happens to availability if a limit is reached or exceeded?
• Which exclusions are applied before and after the calculation?
• What information is needed to review a proposed larger exposure?
• How long does an approval or variation last, and what can change it?
• How are changes shown in the availability report the agency receives?

Ask the provider to work through a sample ledger rather than answering only in general terms. Record the date and conditions attached to any indication; an informal discussion is not necessarily a committed facility change.

Example: the book changes without any late payment#

Assume, purely illustratively, an agency has £100,000 of outstanding invoices and one customer accounts for £30,000. Another £20,000 is invoiced to that customer while the rest of the ledger remains unchanged. The customer's share becomes £50,000 of £120,000, or about 41.7%.

That arithmetic describes the ledger mix only. It does not establish how much a funder will advance or whether a limit has been breached. Ask the provider to apply its actual terms, including eligibility and connected-customer rules, before carrying a drawdown into the payroll forecast.

Test more than the growth case#

Model what happens if other customers pay down their balances while the large customer's invoices remain outstanding. Also ask how a dispute or credit note would affect the calculation. Concentration can change because the rest of the ledger shrinks, not just because one client grows.

Keep proposed placements, signed assignments and issued invoices separate. The provider may need to review a new exposure before it exists in the current aged ledger, while your cash forecast needs the expected timing of payroll and receipts.

Turn the answer into an operating control#

Assign someone to compare the provider's availability report with the forecast and escalate unexplained differences. Keep the agreed review route beside the commercial plan for major clients.

Read the recruitment invoice-finance guide for context. Bring the ledger mix and growth scenario to our funding service to frame a provider discussion around the actual exposure rather than a headline percentage.