Ineligible Accounts

AAA

DEFINITION of 'Ineligible Accounts'

Money that a company counts as an asset, but that a lender will not count as collateral. Ineligible accounts might include accounts receivable that are more than 90 days past due, foreign accounts and illiquid investments. Assets that a lender is likely to accept as collateral include inventory, equipment and accounts receivable that have been due for fewer than 90 days.

INVESTOPEDIA EXPLAINS 'Ineligible Accounts'

When a company requests a loan or line of credit, the bank will examine its financial statements and will only accept certain assets as collateral when determining the company's borrowing capacity. These assets make up what the bank calls "tangible net worth." As a condition of the loan, the bank may require the company to meet ongoing financial standards such as not taking on additional debt and not selling any items that have been pledged as collateral.


The reason why some assets would be considered ineligible as collateral, is that they might be too difficult for the lender to collect. The asset may also be too illiquid or, in the case of accounts receivable past 90 days, they are unlikely to be paid.

RELATED TERMS
  1. Cash Collateral

    Cash collected when liquid assets are sold during Chapter 11 ...
  2. Collateral

    Property or other assets that a borrower offers a lender to secure ...
  3. Non-Recourse Debt

    A type of loan that is secured by collateral, which is usually ...
  4. Accounts Receivable - AR

    Money owed by customers (individuals or corporations) to another ...
  5. Receivables Turnover Ratio

    An accounting measure used to quantify a firm's effectiveness ...
  6. Operating Cost

    Expenses associated with administering a business on a day to ...
RELATED FAQS
  1. What is the difference between a non-recourse loan and a recourse loan?

    The essential difference between a recourse and non-recourse loan has to do with which assets a lender can go after if a ... Read Full Answer >>
  2. What is the difference between asset-based lending and asset financing?

    In the most common usage, the terms "asset-based lending" and "asset financing" refer to the same thing. Asset-based lending ... Read Full Answer >>
  3. How does transfer pricing help business?

    Transfer pricing involves the trade of goods or services between two related companies, and both can come out the winner. ... Read Full Answer >>
  4. How do I calculate my effective tax rate using Excel?

    Your effective tax rate can be calculated using Microsoft Excel through a few standard functions and an accurate breakdown ... Read Full Answer >>
  5. What is the long-term outlook of the chemicals sector?

    The long-term outlook for the chemicals sector, as of 2015, is good, primarily due to continuing emerging market opportunities. ... Read Full Answer >>
  6. How important are contingent liabilities in an audit?

    Contingent liabilities, when present, are very important audit items because they normally represent risks that are easily ... Read Full Answer >>
Related Articles
  1. Entrepreneurship

    Will Insurance Keep Your Business Safe?

    Skilled employees are key to a successful business. Find out how to avoid a financial setback if they leave.
  2. Personal Finance

    Promissory Notes: Not Your Average IOU

    These may be a handy way to borrow money, but this convenience does not come without risk.
  3. Entrepreneurship

    The Impact Of Recession On Businesses

    Find out how this economic cycle affects both small and big business.
  4. Investing

    What A Rate Hike May Mean For Stocks

    By the end of the year, investors will likely be contending with the first Federal Reserve (Fed) rate hike in nearly a decade.
  5. Fundamental Analysis

    How to Calculate a Coverage Ratio

    In broad terms, the higher the coverage ratio, the better the ability of the enterprise to fulfill its obligations to its lenders.
  6. Technical Indicators

    Will These High-Flying Stocks Stay Hot in 2015?

    These 10 stocks were on fire in 2014. Will they stay hot?
  7. Fundamental Analysis

    Invest in Cancer Research with These 3 Stocks

    These cancer research stocks offer both a high ceiling and the potential to save lives.
  8. Charts & Patterns

    Should Investors Get Into Oil Now?

    Oil has enjoyed a steady climb after a violent plunge. Where is it going next, and how can investors profit?
  9. Economics

    What are Noncurrent Assets?

    Noncurrent assets are property that a company owns that will last for more than one year.
  10. Charts & Patterns

    How To Value Airline Stocks

    We explain what drives the stocks of airline companies and how best to assess their values.

You May Also Like

Hot Definitions
  1. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random ...
  2. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  3. Productivity

    An economic measure of output per unit of input. Inputs include labor and capital, while output is typically measured in ...
  4. Variance

    The spread between numbers in a data set, measuring Variance is calculated by taking the differences between each number ...
  5. Terminal Value - TV

    The value of a bond at maturity, or of an asset at a specified, future valuation date, taking into account factors such as ...
  6. Rule Of 70

    A way to estimate the number of years it takes for a certain variable to double. The rule of 70 states that in order to estimate ...
Trading Center