What Is A Concentration Limit In Invoice Finance?
A concentration limit is a cap on how much of your invoice finance facility can be attributed to any single customer.
It is usually expressed as a percentage of the funded sales ledger — often somewhere between 20% and 40%, depending on the funder and your sector. Anything owed by that customer above the limit is simply not funded.
Concentration Limit Example
- Total sales ledger: £500,000
- Concentration limit: 30% — so a maximum of £150,000 from one debtor
- Your largest customer owes £220,000
- £70,000 of that balance falls outside the facility and is not funded
At an 85% advance rate, that excluded balance costs you close to £60,000 of available cash — on invoices that are perfectly valid.
Why Funders Impose It
Risk spread. If 60% of your ledger sits with one customer and that customer fails or disputes an invoice, the funder’s exposure is severe. The limit forces diversification of their risk, not yours.
Why It Catches Businesses Out
This is one of the most common reasons an invoice finance facility delivers less cash than the headline figures suggested. A business is quoted a £500,000 facility at 90%, does the arithmetic, and then finds the actual availability is well short — because a large slice of the ledger sits above the concentration limit.
It hits hardest in sectors that are naturally concentrated: contractors working for one or two main clients, suppliers to a single retailer, recruitment agencies with one dominant account.
What Can Be Done About It
- Negotiate a higher limit for a specific named debtor, particularly where that customer is a large, financially strong business
- Add credit protection on that debtor, which some funders will accept in exchange for a higher limit
- Use a selective facility instead — see selective invoice finance or single invoice finance, which fund chosen invoices rather than the whole ledger
- Compare funders — limits vary meaningfully, and a specialist in your sector will often set them higher than a generalist
Always ask what the concentration limit is before committing to a facility, and model the availability against your actual ledger rather than the headline percentage.
Read more about invoice finance, or speak to us about how your ledger would actually fund.
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