Credit limit

The credit limit (or outstanding balance limit) is the maximum amount of unpaid invoices that a customer is allowed to have. With credit insurance, it is also the amount that the insurer agrees to cover for that customer.

Example

A customer has a credit limit of €50,000. Their outstanding balance is €46,000. A new order for €8,000 would exceed the limit: it is either blocked or approved by the credit manager.

Why It’s Important

It protects the company from excessive exposure to a single customer and serves as a safeguard between sales and finance.

For more information: the credit management guide and the Allianz Trade connector.

See also: outstanding balance, credit insurance, customer risk.