CCR Credit key terms

Credit a supplier extends to a business buyer, allowing payment after goods or services are delivered. It is usually documented by an invoice with stated net terms and often a discount for early settlement.

The stated conditions under which a sale is made on account, including the payment due date, any early-payment discount, and the period during which that discount applies.

A reduction in the invoice amount offered when a buyer pays within a specified early window. It is a financing incentive whose cost to the seller can be compared with the cost of borrowing.

The implied annualized cost of forgoing an early-payment discount and paying at the net due date instead. It is calculated from the discount percentage and the extra days of financing obtained.

The average number of days a business takes to collect receivables, calculated as receivables divided by average daily credit sales. It measures how quickly credit sales convert into cash.

A report that groups open receivables by how long they have been outstanding, typically in 30-day buckets. It highlights overdue balances and guides collection prioritization and bad-debt provisioning.

The excess of current assets over current liabilities, representing the short-term funds available to run day-to-day operations. Extending credit consumes working capital until the customer pays.

The number of days between paying suppliers and collecting cash from customers, combining days inventory outstanding and days sales outstanding, less days payable outstanding.

A pre-approved maximum amount a lender will make available to a borrower, drawn down as needed and repaid according to the agreement. It may be committed or uncommitted.

A facility that lets a borrower draw, repay, and redraw funds up to a set limit during the commitment period. Interest is charged only on the amount actually outstanding.

A contractual promise in a loan agreement requiring the borrower to meet specified financial or operating conditions, such as maintaining a maximum leverage ratio or minimum liquidity.

Lending in which the borrower pledges collateral that the lender can seize and sell if repayment fails. The pledge lowers lender risk and typically reduces the interest rate charged.

The body of law governing secured transactions in personal property, setting rules for creating, perfecting, and enforcing a security interest and for prioritizing competing claims.

A creditor's legal right in a debtor's property that allows the creditor to take or sell that property if the debt is not paid. It arises by agreement and attaches when value is given.

The steps a creditor takes to make a security interest effective against third parties, most often by filing a financing statement. Perfection determines priority over other creditors and a trustee in bankruptcy.

A legal claim against property that secures payment of a debt or obligation. It may be consensual, such as a mortgage, or arise by operation of law, such as a mechanic's lien.

A statutory claim on real property filed by contractors, subcontractors, or suppliers who furnished labor or materials and were not paid. Strict notice and filing deadlines apply.

A demand for payment made against a surety bond, often a payment bond on a construction project, by a party owed money for labor or materials supplied to the bonded contract.

A three-party instrument in which a surety guarantees to an obligee that a principal will perform an obligation or pay covered claims. The surety generally has recourse against the principal.

A promise by a third party to answer for another party's debt or performance if that party defaults. The guarantor's liability may be limited in amount, duration, or scope.

A commitment by an individual, often an owner of the business, to repay a company's obligation if the company fails to pay. It shifts risk to the individual's personal assets.

A legal rule requiring certain contracts, including some credit agreements and guarantees, to be in writing and signed to be enforceable. It prevents enforcement of purely oral promises in covered cases.

A federal law governing consumer credit reporting that sets accuracy, access, and dispute rights. It restricts who may obtain reports and requires adverse-action notices when reports drive credit denials.

A required communication telling an applicant that credit was denied or terms were worsened, stating the reasons and the applicant's rights. It supports transparency and fair-treatment obligations.

A federal law prohibiting credit discrimination on protected grounds such as race, sex, marital status, age, or receipt of public assistance. It requires consistent, documented credit standards.

An injunction that takes effect when a bankruptcy petition is filed, halting most collection activity, lawsuits, and lien enforcement against the debtor and its property until the court lifts it.

A payment or transfer made to a creditor shortly before bankruptcy that lets that creditor receive more than it would in the case. The trustee may recover such transfers for the estate.

A formal document filed in a bankruptcy case stating the amount and basis of a creditor's claim. Filing preserves the creditor's right to a distribution from the estate.

An unsecured claim entitled by statute to be paid ahead of general unsecured creditors, such as certain taxes or wages. Priority affects expected recovery in a bankruptcy distribution.

The process of transferring figures from a borrower's financial statements into a standardized analytical format. It lets an analyst compare periods, peers, and trends consistently.

Evaluating a business by computing relationships among financial statement items, such as liquidity, leverage, and profitability ratios, to judge performance and risk relative to history and peers.

Presenting financial statement items as percentages of a common base, such as total assets or revenue. It reveals structural shifts and enables comparison across firms of different sizes.

A measure of how much debt a business carries relative to equity, assets, or earnings. Higher leverage generally means greater fixed obligations and higher financial risk for creditors.

A measure of cash available to meet scheduled principal and interest payments, typically operating cash flow divided by debt service. A ratio below one signals insufficient repayment capacity.

A financial statement showing cash generated and used across operating, investing, and financing activities. It helps creditors assess whether earnings actually convert into cash available for repayment.

A composite score built from weighted financial ratios that estimates a company's likelihood of financial distress. Lower scores indicate higher bankruptcy risk and warrant closer credit scrutiny.

A statistical tool that combines weighted borrower characteristics into a numeric score predicting payment behavior. It supports consistent, objective decisions and risk-based terms.

A form on which a prospective customer provides identity, financial, and trade-reference information and consents to verification. It is the starting point for underwriting a credit account.

A report from another supplier about how a customer has paid past invoices, including amounts, terms, and delinquency history. It is a key input when no audited financials are available.

The maximum outstanding balance a creditor will allow a customer to carry at one time. It is set from assessed risk and reviewed as payment behavior and financial condition change.

The condition of an account whose payment is past due. Delinquency is tracked in aging buckets and typically triggers escalating collection actions and possible credit hold.

A status that suspends new orders or shipments to a customer until overdue balances are resolved. It is a control used to limit further exposure while collections proceed.

A structured plan for recovering overdue receivables, sequencing reminders, calls, escalation, and legal action by account risk and age. It balances recovery with preserving customer relationships.