This article will provide you with valuable insights into the essential distinctions between credit limits and funding limits.
What is a Funding Limit?
A Funding Limit is the maximum amount we will lend to the customer against a specific client. The amount is requested by the customer and reviewed by Credit Risk.
These are currency-specific - meaning that a limit for GBP & EUR will have to be requested separately.
Understanding Credit Limit vs Funding Limit
The primary difference between Credit Limits and Funding Limits is that a Credit Limit is covered entirely by BDP (Bad Debt Protection). In other words, it is the maximum value on which Sonovate will offer BDP.
You (the customer) can have a Funding Limit larger than your Credit Limit, however the difference will be unprotected.
You (the customer) must agree to a Credit Limit (if less than the Funding Limit originally requested) before it will be instated on Time & Fund. An automatic recourse email is sent to each customer by our Credit Risk team, who will add the Credit Limit when a response is received from You, agreeing to the limit.
The two limits and their balances are both visible under Limits and Usage.