Ineligible receivables

A receivables facility does not lend against your ledger. It lends against the part of the ledger the lender is willing to count. Everything else is ineligible, and the eligibility rules are set out in the agreement and applied by the lender.

Standard exclusions

• Aged: invoices past a stated number of days from invoice or due date
• Cross-aged: the taint or contamination rule. If a defined proportion of one customer's balance goes past due, that customer's entire balance becomes ineligible, including current invoices
• Concentration: the portion of any single customer's balance above a stated percentage of the total ledger
• Contra accounts: customers who are also your suppliers, because they can set off what they owe you against what you owe them
• Affiliates and related parties
• Government: federal receivables require compliance with the Assignment of Claims Act, and many state and municipal receivables have their own restrictions
• Foreign debtors, unless credit-insured or backed by a letter of credit
• Disputed, short-paid, subject to warranty claims or rights of return
• Progress billings, bill-and-hold, consignment and pre-billed work — anything not yet fully earned

Why it moves without warning

Eligibility is recalculated on every borrowing base certificate. A single customer drifting past due can pull their whole balance out through cross-aging, and availability drops the same day. The agreement typically also gives the lender discretion to declare additional reserves or exclusions, which is a clause worth locating before you rely on the facility.