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. To what extent will changing fuel costs affect the profitability of the airline industry?

    Fuel costs represent one of the biggest expenses for the aerospace and airline industries. On average, fuel costs account ... Read Full Answer >>
  4. What debt to equity ratio is common for a bank?

    The average debt-to-equity ratio for retail and commercial U.S. banks, as of January 2015, is approximately 2.2. For investment ... Read Full Answer >>
  5. What is the average profit margin for a company in the banking sector?

    The average net profit margin for retail or commercial banks, as of January 2015, is approximately 18%. This compares favorably ... Read Full Answer >>
  6. How can an investor evaluate the leverage of an insurance company?

    For investors conducting fundamental analyses of insurance companies, leverage can have multiple definitions. Insurance leverage ... 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 Basics

    Explaining Write-Downs

    A write-down is a reduction in the book value of an asset because it is overvalued compared to the market value.
  5. Credit & Loans

    What is an Unsecured Loan?

    An unsecured loan is based on the creditworthiness of the borrower, and has no collateral securing the loan.
  6. 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.
  7. 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.
  8. Technical Indicators

    Will These High-Flying Stocks Stay Hot in 2015?

    These 10 stocks were on fire in 2014. Will they stay hot?
  9. 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.
  10. 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?

You May Also Like

Hot Definitions
  1. Covered Call

    An options strategy whereby an investor holds a long position in an asset and writes (sells) call options on that same asset ...
  2. Butterfly Spread

    A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration ...
  3. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
  4. Moving Average - MA

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

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

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