The Procurement Glossary » Credit Terms

Credit Terms

Finance & Payments

Definition

The conditions under which a supplier extends trade credit to a buyer, including limit, period and any security.

Explanation

Credit terms let a buyer receive goods now and pay later, effectively an interest-free short-term loan. The supplier sets a credit limit and period based on the buyer's creditworthiness; exceeding the limit can block further orders.

Example

The supplier grants RM100,000 of credit on net-30 terms after checking the buyer's accounts.

Related terms

• Payment Terms — The agreed conditions for when and how a buyer pays a supplier, such as 'net 30 days' from invoice date.
• Net Terms (Net 30 / 60 / 90) — Payment terms specifying the number of days a buyer has to pay in full after the invoice date.
• Credit Rating — An assessment of an entity's creditworthiness — its likelihood of meeting financial obligations.
• Working Capital — The money tied up in day-to-day operations — broadly current assets (inventory, receivables) minus current liabilities (payables).

Frequently Asked Questions

What is Credit Terms?

The conditions under which a supplier extends trade credit to a buyer, including limit, period and any security. Credit terms let a buyer receive goods now and pay later, effectively an interest-free short-term loan. The supplier sets a credit limit and period based on the buyer's creditworthiness; exceeding the limit can block further orders.

Can you give an example of Credit Terms?

The supplier grants RM100,000 of credit on net-30 terms after checking the buyer's accounts.

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