A/R Concentration

Last Updated: Jun 6, 2019

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Last Edited By :

Created On : Jun 6, 2019

AR Concentrations is a term used to describe the largest customers of a borrower. AR Concentrations represent a credit risk to lenders in two different ways. If a large customer does not pay the borrower for any reason, the collection of the loans may be at risk because of the advances the lender made to borrower in respect of the sales to its concentrated customer. Reasons the customer may not pay could include that customer’s insolvency, or because of a dispute it is having with our borrower. A second risk with concentrated accounts is if a large customer discontinues buying from our borrower for any reason, our borrower may not have enough sales or other customers to allow it to remain profitable and remain as a going concern.