Credit limit
Also called credit line
Reviewed by Dasha ShakovVP Marketing, Proton
Updated
What is credit limit?
A credit limit is the maximum unpaid balance a distributor allows a customer to carry on its account. The credit department sets it from the customer’s credit application, references and payment history, and reviews it as the account grows.
Credit limit example
A contractor with a $25,000 limit wins a large job and asks for $60,000. The credit manager raises the limit for that project through a separate job account.
Related terms
- Credit holdA credit hold is a block a distributor puts on a customer’s account, or on a single order, so that nothing ships until the credit department releases it.
- Net termsNet terms are payment terms that give a business customer a set number of days after the invoice date to pay the full amount, such as net 30 or net 60.
- Job accountA job account is a separate account a distributor opens for one construction project, so material for that job is tracked, billed and secured on its own.
- Accounts receivable (AR)Accounts receivable (AR) is the money customers owe a company for goods already delivered and invoiced but not yet paid for.
