On an A/R line of credit, how much you can draw depends on more than one number. Your approved limit is the most the facility can reach. Your eligible receivables are the invoices that support borrowing today. Your outstanding balance is what you have already drawn. What you can draw now is the room left once those are taken into account.
Four numbers to know
| Term | What it means | What changes it |
|---|---|---|
| Approved facility limit | The most the facility can reach. | A review or amendment of the facility. |
| Eligible receivables | Current invoices that meet the lender's rules and support borrowing. | New invoices, customer payments, and invoices aging out. |
| Outstanding balance | What you have drawn and not yet repaid. | Each draw and each repayment. |
| Available to draw | The room left to draw today. | All three of the above. |
In many facilities, what you can draw is generally the lesser of your approved limit and the amount your eligible receivables support, minus your outstanding balance. The exact formula is set out in your agreement.
Which receivables count
Rules vary by lender, but receivables commonly count when they are:
- For work delivered to creditworthy business customers.
- Within a reasonable age and not in dispute.
- Owed by customers unrelated to you.
Invoices that age past a set point, are disputed, or are owed by related parties are often left out. Some lenders also cap how much any one customer can contribute, so heavy reliance on a single customer can limit what is available.
How drawing and repaying work together
A revolving facility lets you draw, repay, and draw again. As customers pay their invoices, you repay, which lowers your outstanding balance and frees room to draw again, as long as you stay within your approved limit and have eligible receivables to support it.
That is the difference between a revolving facility and a one-time advance. Repaying a draw does not raise your limit. It restores room beneath it.
Why availability moves
Because it follows your receivables, availability can rise as you invoice more and ease when invoicing slows. That is one reason it suits businesses with seasonal or growing sales.
Your approved limit does not change automatically as billings grow. If your needs outgrow it, increasing the limit is a conversation with your lender. See the A/R line of credit page for how the facility works.
Questions to ask a lender
- What counts as an eligible receivable, and what is excluded?
- What portion of eligible receivables is available to draw?
- Are there limits on how much one customer can contribute?
- How often is availability calculated and updated?
- What happens to availability when an invoice ages out or is disputed?
If you already have a bank line, our guide on A/R financing vs. a bank line of credit explains how the two differ.