Concentration limit
What is a concentration limit in lending?
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BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED
// THE SHORT ANSWER
A concentration limit caps how much exposure may build in one place. Across a bank's book the limits run by sector, geography and single name, and they are why appetite can close against a whole industry while an individual business in it has changed nothing. Inside a receivables facility, a concentration limit caps the share of the borrowing base any one debtor may make up, so that a ledger dominated by one customer cannot be financed as if it were spread across many.
BASIS Practitioner judgment from sixteen years in commercial banking, set out in How Bankers Think (Highbank Press, 2026). Every borrower on this site is a composite constructed for teaching, not a client. The market is mid-market commercial lending as practised in New Zealand and Australia; where a convention differs elsewhere, the page says so.
// WORKED IN
// NEXT TO IT
- Borrowing base
- Dilution (receivables)
- Advance rate
- Eligible receivables
- Recourse (receivables finance)
- Invoice discounting
- Trade credit insurance
- Performance bond
- Standby letter of credit (SBLC)
- Documentary collection
- Letter of credit (LC)
- Sub-limit
- Open account
- Discrepancy (letter of credit)
- Documents against acceptance (D/A)
- Early settlement discount
- Aged debtors report
- Collection account
- Availability (borrowing base)
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