Eligibility criteria
Draft definition. Technical and editorial approval pending.
The contractual tests a receivable must satisfy to count toward the borrowing base. Criteria typically address obligor characteristics, documentation, delinquency status, term and concentration. A receivable can be perfectly performing and still be ineligible if it fails a technical test, which means eligibility and credit quality are related but genuinely separate concepts in a facility.
In practice
In a fictional facility, receivables to obligors already representing more than 5 percent of the pool become ineligible above that threshold. Two large obligors performing well can still push 400,000 USD of otherwise sound collateral out of the borrowing base, reducing available capacity without any deterioration in credit.
Read this in context: Negotiating Terms.