What is the credit limit calculation tool?

This tool calculates the outstanding need with your buyer, based on the volume of business coming and payment terms granted. It compares then the result (theoretical credit limit) with its financial capabilities to determine the acceptable credit limit.

It is based by default on two financial criteria:

• The Tangible Net Worth (TNW, equity minus intangible assets)
   
• The Turnover

And calculate the acceptable credit limit by applying the corresponding percentage on these two criteria (the most restrictive result applies).
These criteria can be modified by clicking on Customize scoring criteria.



The objective is to define a credit limit that is consistent with the financial capabilities of the buyer.


According to the result of the credit notation, the acceptable credit limit will be at most equal to the percentage of the TNW or the turnover defined.
→ Learn more: What is the credit notation?

Example of calculation using the following assumptions:

• The Sales forecast (outstanding need) is 250 000 euros. the calculated Theorical credit limit (credit limit need) is 50 000 euros
   
• The TNW of the customer is 80 000 euros
   
• Its yearly turnover is 700 000 euros
   
• Credit notation result is B
   

The result is maximum: 35% x 80 000 = 28 000 euros or 5% x 700 000 = 35 000 euros.


You can save the result of the calculation to keep the history.