Dilution
Draft definition. Technical and editorial approval pending.
Reductions in receivable balances that arise from something other than credit loss, such as refunds, adjustments, cancellations, disputes or billing corrections. Providers track dilution separately because it reduces collateral value without appearing in delinquency or charge-off statistics. Persistent dilution often results in a specific reserve against the borrowing base.
In practice
In a fictional quarter, 150,000 USD of a 10m USD pool is written down through merchant refunds and billing corrections. Nothing defaulted, but eligible collateral falls and your borrowing capacity falls with it. Track dilution as its own metric rather than folding it into loss reporting.
Read this in context: What You Need.