Commercial Credit

AAA

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"

INVESTOPEDIA EXPLAINS '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. Credit Agreement

    A legal contract in which a bank arranges to loan a customer ...
  2. Open-End Credit

    A pre-approved loan between a financial institution and borrower ...
  3. Credit

    1. A contractual agreement in which a borrower receives something ...
  4. Interest

    1. The charge for the privilege of borrowing money, typically ...
  5. Line Of Credit - LOC

    An arrangement between a financial institution, usually a bank, ...
  6. Readvanceable Mortgage

    A mortgage feature that allows the borrower to re-borrow the ...
RELATED FAQS
  1. No results found.
Related Articles
  1. Bonds & Fixed Income

    The Impact Of An Inverted Yield Curve

    Find out what happens when short-term interest rates exceed long-term rates.
  2. Options & Futures

    Different Needs, Different Loans

    Find out what options are available when it comes to borrowing money.
  3. Entrepreneurship

    Funding A Startup When Bank Loans Aren't Possible

    There are alternative ways to fund your business start-up when it is not possible to secure a bank loan, but consider the costs and risks of each option.
  4. Home & Auto

    Leveraging Leverage For Bigger Profits

    Leverage is like fire. Find out how to use it to heat up your investing without burning your portfolio.
  5. 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. ...
  6. Credit & Loans

    How Line of Credit Works

    A line of credit is an arrangement where a bank offers a maximum loan amount that the borrower can draw upon at any time. The borrower – which can be an individual, business or government ...
  7. Entrepreneurship

    Mezzanine Financing

    Learn about this alternative method of financing companies use to finance expansion.
  8. Credit & Loans

    Why Making Minimum Payments Gets You Nowhere

    Getting out of debt can be difficult, but paying off a minimum balance each month only makes things worse.
  9. Taxes

    Canada: A New Frontier For Real Estate Investors

    This property market is easy to access and provides profitable opportunities.
  10. Home & Auto

    Additional Streams Of Income For Seniors

    Find out how a reverse mortgage can work in your favor during retirement.

You May Also Like

Hot Definitions
  1. Sunk Cost

    A cost that has already been incurred and thus cannot be recovered. A sunk cost differs from other, future costs that a business ...
  2. Technical Skills

    1. The knowledge and abilities needed to accomplish mathematical, engineering, scientific or computer-related duties, as ...
  3. Prepaid Expense

    A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received ...
  4. Gordon Growth Model

    A model for determining the intrinsic value of a stock, based on a future series of dividends that grow at a constant rate. ...
  5. Cost Accounting

    A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step ...
  6. Law Of Supply

    A microeconomic law stating that, all other factors being equal, as the price of a good or service increases, the quantity ...
Trading Center