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. Non-Recourse Debt

    A type of loan that is secured by collateral, which is usually ...
  3. Receivables Turnover Ratio

    An accounting measure used to quantify a firm's effectiveness ...
  4. Accounts Receivable - AR

    Money owed by customers (individuals or corporations) to another ...
  5. Collateral

    Property or other assets that a borrower offers a lender to secure ...
  6. Expanded Accounting Equation

    The expanded accounting equation is derived from the accounting ...
Related Articles
  1. Will Insurance Keep Your Business Safe?
    Entrepreneurship

    Will Insurance Keep Your Business Safe?

  2. Promissory Notes: Not Your Average IOU
    Personal Finance

    Promissory Notes: Not Your Average IOU

  3. The Impact Of Recession On Businesses
    Entrepreneurship

    The Impact Of Recession On Businesses

  4. What is the difference between a non-recourse ...
    Investing

    What is the difference between a non-recourse ...

comments powered by Disqus
Hot Definitions
  1. Ghosting

    An illegal practice whereby two or more market makers collectively attempt to influence and change the price of a stock. ...
  2. Elasticity

    A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which ...
  3. Tangible Common Equity - TCE

    A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. ...
  4. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity date. YTM is considered a long-term bond yield expressed ...
  5. Net Present Value Of Growth Opportunities - NPVGO

    A calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. ...
  6. Gresham's Law

    A monetary principle stating that "bad money drives out good." In currency valuation, Gresham's Law states that if a new ...
Trading Center