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. Interest

    The charge for the privilege of borrowing money, typically expressed ...
  2. Credit Agreement

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

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

    1. A contractual agreement in which a borrower receives something ...
  5. Line Of Credit - LOC

    An arrangement between a financial institution, usually a bank, ...
  6. Mezzanine Debt

    When a hybrid debt issue is subordinated to another debt issue ...
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. Credit & Loans

    How to Get the Most out of Your HELOC

    A home equity line of credit allows you to leverage your home for different reasons. Here are three ways to get the most out of this line of credit.
  4. Investing Basics

    Understanding Structured Finance

    Structured finance refers to a complex financial transaction involving large financial institutions and companies with unique needs.
  5. Options & Futures

    Home-Equity Loans: What You Need To Know

    We shed light on why consumers decide to use this form of debt and whether it is a good alternative.
  6. Fundamental Analysis

    European Banks: Growth in 2016?

    Understand the potential growth drivers of the European banking sector and whether 2016 will be a year of growth or continued stagnation.
  7. Retirement

    Additional Streams of Income for Seniors

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

    Return on Brokerage Client Assets: A Look at Morgan Stanley

    Revenues and profits in securities brokerage and wealth management are driven by the return on client's assets. We explain how to derive this metric.
  9. Home & Auto

    When Should You Consider Taking out a HELOC?

    Home equity lines of credit, or HELOCs, have gotten a bum rap since the housing meltdown. But used correctly, they can be a cheap way to access capital.
  10. Home & Auto

    What to Do When You Can't Pay Back Your HELOC

    Home equity lines of credit can be a cheap way to tap the equity in your home, but will you risk losing your home if you can't make the repayments?
RELATED FAQS
  1. Are FHA loans fixed?

    Learn more about Federal Housing Authority (FHA) loan programs, the requirements for qualifying and how such loans can be ... Read Answer >>
  2. Can Sallie Mae garnish my wages?

    Discover whether or not, and why, private lenders such as Sallie Mae have the ability to garnish a defaulted borrower's wages. Read Answer >>
  3. What is the difference between "closed end credit" and a "line of credit?"

    Find out about the difference between closed-end credit and lines of credit, and how both closed- and open-end credit is ... Read Answer >>
  4. What are typical forms of long-term debt for a public company?

    Learn typical forms of long-term debt for a public company, such as bonds, term loans, paid-in-kind notes, leases and hybrid ... Read Answer >>
  5. What is the difference between subordinated debt and senior debt?

    Understand the difference between subordinated debt and senior debt. Learn what a company is required to do in case of bankruptcy. Read Answer >>
  6. How would a standby letter of credit be used during an export transaction?

    Learn what a standby letter of credit is and how it works, as well as how a standby letter of credit is typically used for ... Read Answer >>
Hot Definitions
  1. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  2. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
  3. Generally Accepted Accounting Principles - GAAP

    The common set of accounting principles, standards and procedures that companies use to compile their financial statements. ...
  4. DuPont Analysis

    A method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are ...
  5. Call Option

    An agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument ...
  6. Economies Of Scale

    Economies of scale is the cost advantage that arises with increased output of a product. Economies of scale arise because ...
Trading Center