What is a concentration reserve or single-debtor cap in an ABL facility?
Last updated: August 27, 2026
Why do ABL lenders impose concentration limits?
If a borrower's AR is heavily concentrated with a single customer, the lender faces significant risk if that customer defaults or becomes insolvent. Losing one large customer could eliminate a substantial portion of the borrower's collateral and ability to repay the revolver. Concentration limits diversify the lender's exposure across multiple customers, reducing single-debtor credit risk.
How is a concentration reserve calculated?
The credit agreement specifies the concentration cap. The OCC Comptroller's Handbook on Asset-Based Lending states that concentration is typically defined as "10 percent or more" of the total AR portfolio, and the typical limit is "10 percent to 20 percent of the receivables borrowing base." The borrowing base certificate identifies AR from each customer and caps the amount that may count toward eligible collateral.
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Frequently asked questions
What is a concentration reserve or single-debtor cap in an ABL facility?
A concentration reserve (or single-debtor cap) limits how much AR from any one customer may count toward the borrowing base. The OCC Comptroller's Handbook on Asset-Based Lending states that concentration is typically defined as "10 percent or more" of the total AR portfolio, and the typical limit is "10 percent to 20 percent of the receivables borrowing base." The concentration limit protects the lender from overexposure to a single customer's credit risk.