Credit limit
The maximum outstanding balance a business lets a customer carry before new orders are held or reviewed.
Credit limits are usually set from the customer's financial strength, payment history and expected order volume, then reviewed as those change.
A limit only works if it's checked when orders are placed and kept up to date. Customers who regularly exceed it need either a higher limit or closer attention.
Related terms
- Credit holdA block on new orders or shipments for a customer who's over their credit limit or seriously past due, until the balance is paid or the order is approved.
- Credit managementDeciding which customers get credit, how much and on what terms, then monitoring that risk while they owe you money.
- Credit policyWritten rules for granting credit: who qualifies, how limits and terms are set, who can approve exceptions and when accounts are escalated.