A credit limit is the maximum outstanding balance a seller allows a buyer to owe at any one time under trade credit terms (for example net 30 or net 60). It is a ceiling on unpaid invoices, not a per-order cap. When a new order would push the buyer’s running balance above the limit, the seller may hold or decline that order until the buyer pays down what they already owe.
How it works
The seller assigns each trade account a limit based on the buyer’s payment history, credit references, or a credit check. As invoices go out and payments come in, the buyer’s outstanding balance moves up and down. Available credit is the limit minus the current balance. A buyer with a $50,000 limit who already owes $42,000 can only place another $8,000 on terms before hitting the ceiling.
Why it matters
Credit limits cap the seller’s exposure if a buyer stops paying, while still letting reliable accounts order without paying upfront every time. Set the limit too low and you frustrate good customers and slow reorders. Set it too high and one bad debt can hurt cash flow. Most sellers review limits periodically and raise them as an account builds a clean payment record.
Applying it to B2B quoting on Shopify
Shopify’s native B2B tools let you assign payment terms and a credit limit to company locations, and checkout can block orders that would exceed it. When you quote a large order to a company on terms, it helps to check available credit before you send, so the buyer is not blocked at the moment they try to accept and pay. If a quote would exceed the limit, you can split it, ask for partial prepayment, or request a limit increase first. See the B2B quoting glossary for related terms like net terms and draft orders.