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.

  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. Credit

    1. A contractual agreement in which a borrower receives something ...
  4. Open-End Credit

    A pre-approved loan between a financial institution and borrower ...
  5. Line Of Credit - LOC

    An arrangement between a financial institution, usually a bank, ...
  6. Tenured Capital

    Loans offered by the government to key business sectors.
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