Influencing Factors in Determining Credit Terms

Setting credit terms in compliance with stated credit policy of the company before taking a credit granting decision is very much essential for every business firm. Credit terms are the arrangements between buyer and seller which specify the conditions of payments of goods or services purchased. What credit terms will be followed by sellers is depend upon the seller‟s place in the market, and the credit terms on which he is buying from his own suppliers. Next most important aspect for the seller is that the availability of funds, he needs to finance his own credit sales. From the customer point of view, it is probably desirable to use credit limits, because this practice will tend to hold his temptation to overbuy or commit himself beyond his ability to repay.