---
title: "Credit Limit"
canonical: "https://kb.myframeworks.com.au/space/FRAM/28382462/Credit%20Limit"
format: markdown
---
All credit evaluations should be stated as an amount which a customer is allowed to purchase.

In setting that amount it is necessary to consider:

- Terms of credit
- Likely anticipated purchase

Assuming that credit terms are 30 days and that the customer expects to purchase $2,000 per month, it is pointless setting the credit limit at $2,000. It would be more appropriate to set the limit at perhaps $2,500 to allow for possible likely increases in sales and allow the debtor to trade while a payment may be in limbo.

This may be reduced by the trade reference reports or some other information that suggests the account should be no higher than $1,000 and less than the standard 30 days with an agreement to build up to 30 days after satisfactory performance of the account for a period of six months.