Commercial Credit

DEFINITION of 'Commercial Credit'

A pre-approved amount of money issued by a bank to a company that can be accessed by the borrowing company at any time to help meet various financial obligations. Commercial credit is commonly used to fund common day-to-day operations and is often paid back once funds become available.

Also commonly referred to as a "commercial line of credit" or "business credit"

BREAKING DOWN 'Commercial Credit'

Commercial credit is often used by companies to help fund new business opportunities or to pay for unexpected charges. For example, imagine that XYZ Manufacturing Inc. has the chance to buy a piece of much needed machinery at a deep discount. Let's assume that the piece of equipment normally costs $250,000, but is being sold for $100,000 on a first-come, first-serve basis. In this example, XYZ Manufacturing could access its commercial credit agreement to get the required funds immediately. The firm would then pay the borrowed amount back at a later date.

RELATED TERMS
  1. Open-End Credit

    A pre-approved loan between a financial institution and borrower ...
  2. Pre-Approval

    An evaluation of a potential borrower by a lender that determines ...
  3. Trade Credit

    An agreement where a customer can purchase goods on account (without ...
  4. Credit Limit

    The amount of credit that a financial institution extends to ...
  5. Commercial

    Relating to commerce. In the investment field, the term "commercial" ...
  6. Credit Reporting Agency

    This term refers to businesses that maintain historical information ...
Related Articles
  1. Credit & Loans

    The Basics Of Lines Of Credit

    Lines of credit are potentially useful hybrids of credit cards and normal loans. Learn how a line of credit can help (and hurt) your finances, and how to find the best one to suit your needs. ...
  2. Personal Finance

    Understanding Credit

    Credit has three common meanings in the financial world.
  3. Credit & Loans

    Understanding Credit Risk

    Credit risk arises whenever a borrower is expecting to use future cash flows to pay a current debt.
  4. Home & Auto

    Revolving Credit vs. Line of Credit

    Revolving credit and a line of credit are arrangements made between a lending institution and a business or individual.
  5. Credit & Loans

    What's a Revolving Line of Credit?

    A revolving line of credit is an arrangement made between a company or an individual and a bank to borrow money on a short-term basis.
  6. Personal Finance

    What's a Commercial Bank?

    A commercial bank is a type of financial institution that accepts deposits, offers checking account services, makes business, personal and mortgage loans; and offers basic financial products ...
  7. Credit & Loans

    Time to Accept Credit Card Offers Again?

    How much you could get and whether to respond
  8. Credit & Loans

    Build Your Credit Score

    Here are four good ways to build your credit score when you're starting from scratch. Do it right and you'll end up with excellent credit.
  9. Retirement

    Money Market Mayhem: The Reserve Fund Meltdown

    This event serves as a stark reminder to investors about understanding their portfolios.
  10. Credit & Loans

    Business Vs. Consumer Credit Reports: What's the Difference?

    Find out the difference between a business credit report and a personal credit report, and why it should matter for business owners.
RELATED FAQS
  1. What are some good alternatives to taking out a line of credit?

    Read more about how opening a line of credit might not be the best answer for you and determine available alternatives if ... Read Answer >>
  2. What is the difference between available credit and credit limit?

    Explore the difference between available credit and credit limit and the implications different account balances have on ... Read Answer >>
  3. Is it possible to have a credit limit that's too high?

    Avoid these pitfalls when working with high credit limits, and learn how to increase your credit score by increasing your ... Read Answer >>
  4. What's the difference between investment banks and commercial banks?

    Understand the principal differences between investment banks and commercial banks, and the areas of banking services that ... Read Answer >>
  5. Can retail investors buy commercial paper?

    Find out whether retail investors buy commercial paper, and learn about the restrictions that often prevent individual investors ... Read Answer >>
  6. What is the difference between bad credit and no credit?

    The answer to this question will depend on what information (if any) is found on your credit report, such as any bankruptcy ... Read Answer >>
Hot Definitions
  1. Demand Curve

    The demand curve is a graphical representation of the relationship between the price of a good or service and the quantity ...
  2. Goldilocks Economy

    An economy that is not so hot that it causes inflation, and not so cold that it causes a recession. This term is used to ...
  3. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
  4. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  5. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  6. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
Trading Center