Set a business customer credit limit
Enter the customer’s orders, payment terms and finances to see one credit limit, what sets it and how to close any gap.
Credit limit
The limit is €50,000 against orders needing €75,000, and a deposit or guarantee of €25,000, or payment terms of 15 days, closes the gap.
Orders and limits
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Set credit limits, payment terms and deposits for each customer with rules that read customer data and payment history the same way every time. Start free
See the formula
Orders need = Monthly purchases × (Payment terms + Average days late) ÷ 30 Net worth = Net worth × Share of net worth Working capital = Working capital × Share of working capital Insurance total = Credit insurance cover + Amount carried above cover Credit limit = min(Orders need, Net worth, Working capital, Insurance total) Gap to cover = Orders need − Credit limit Terms that fit = Credit limit ÷ (Monthly purchases ÷ 30) − Average days late
With a 30-day month, the limit is the lower of what orders need and the limits in use.
Customer credit limit calculator
This calculator works out what a customer’s orders need from monthly purchases, payment terms and average days late. It compares that amount with limits based on net worth, working capital and credit insurance.
The credit limit shows how much of a customer’s orders can be covered on payment terms. Use the gap to set a deposit or guarantee, or see which payment terms fit the limit.
Credit limit questions
How do I calculate a customer credit limit?
Work out what the orders need by multiplying monthly purchases by payment terms plus average days late, then dividing by 30. The credit limit is the lowest of that amount and the limits in use.
What is the trade credit limit formula?
The orders need equal monthly purchases multiplied by payment terms plus average days late, divided by 30. The calculator compares that amount with the limits in use.
How does net worth affect a customer credit limit?
The net worth limit is the customer’s net worth multiplied by the share set by your policy. The credit limit is the lowest of the orders need and the limits in use.
How do payment terms affect a customer credit limit?
Longer payment terms increase what the orders need, as does a longer average delay in payment. The calculator also shows which payment terms fit the credit limit.
How much credit should I give a new customer?
The calculator shows a credit limit based on the customer’s orders and the limits you enter. The shares of net worth and working capital are set by your policy.