Calculating the credit limit of a B2B customer: 4 proven methods

In brief

Granting too high a credit line to a B2B customer means exposing yourself to outright loss if they default. Conversely, too low a limit kills the sale. Best practice is to combine four methods: three caps computed from the annual accounts (equity, turnover, assets) and a fourth derived from financial scoring. The final limit is the minimum of the four — the most prudent method wins.

Why four methods rather than one?

A single formula never captures the full picture. A company may have comfortable equity but tight cash, or a fast-growing turnover without the balance sheet to support it. Crossing several angles is what every professional credit insurer does (Atradius, Coface, Euler Hermes). It is also what NBB risk methodologies recommend.

Method 1 — Equity cap (10%)

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Limit_Equity = 10% × Equity

Logic: a customer should not owe you more than 10% of its equity, otherwise your claim represents too large a share of its net worth and you become a creditor depending on the company's fate.

Example: company with €380,000 equity → maximum exposure = €38,000.

Works well for: well-capitalised companies, traditional sectors (services, consulting, B2B distribution).

Limitations: a highly leveraged company (low equity but high turnover) will be mechanically under-rated. Typical for trading companies or very young ones.

Method 2 — Turnover cap (2 months)

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Limit_Turnover = (Annual turnover / 12) × 2

Logic: a classic B2B customer pays on average between 30 and 60 days. You should not have more than two months of turnover outstanding at once, otherwise your exposure exceeds the normal payment cycle.

Example: company with €2,100,000 annual turnover → maximum exposure = €350,000.

Works well for: companies with regular activity, sectors with predictable payment terms.

Limitations: if the company files an abridged schema, turnover is not always reported separately. You then use total operating income (70/74) as a proxy, which slightly overstates the limit.

Method 3 — Asset cap (5%)

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Limit_Assets = 5% × Total assets

Logic: your claim should not exceed 5% of the total balance sheet. Beyond that, you become a "material" creditor who could weigh on going concern in case of payment dispute.

Example: company with €1,200,000 total balance sheet → maximum exposure = €60,000.

Works well for: companies with significant assets (real estate, productive equipment).

Limitations: on "asset-light" companies (consulting, software), the balance sheet is small and this cap may be too restrictive.

Method 4 — Financial scoring (multiplier)

The most sophisticated method: start from a base limit (e.g. Limit_Turnover / 4 = half a month of turnover), then apply a multiplier that depends on the overall financial score of the company:

Example: company with half a month of turnover = €87,500 and a Z''-Score of 3.20 (safe zone, × 1.5 multiplier) → scoring limit = €131,250.

This method typically uses the consensus between Altman Z'' and Conan-Holder — when both models converge, confidence is high and you can take the indicative multiplier. If they diverge, downgrade by one tier.

Final limit = minimum of the four

Take our Brussels SRL:

The equity cap wins here. Makes sense: this company has dynamic turnover but its capital base is still modest — granting more than €38,000 of simultaneous exposure would be imprudent.

When to relax, when to tighten

Relax:

• The customer has a bank guarantee or a credit insurance (Atradius, etc.) covering the receivable

• The customer has been paying upfront for 3+ years (excellent payment history)

• The customer is a subsidiary of a solid listed group (parent guarantee)

Tighten:

• The customer filed its latest accounts late (strong warning signal)

• The customer had a recent change of directors (instability)

• The customer has a very recent name suggesting a rebrand after a prior default

• The customer appears on a sanctions list or the ultimate beneficial owners are PEPs — see our guide on PEP screening

Operational implementation

In a CRM/ERP workflow, the credit limit should be:

Automation via Company Belgium

The Company Belgium API exposes a dedicated endpoint that computes the four caps automatically from the most recent available annual accounts, and returns the final limit:

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GET /api/companies/{enterpriseNumber}/financial-intelligence

The response includes a creditLimit block with:

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{
  "amount": 38000,
  "caps": {
    "equityCap": 38000,
    "turnoverCap": 350000,
    "assetsCap": 60000,
    "scoringCap": 131250
  },
  "decidingMethod": "equity",
  "confidence": "HIGH"
}

The confidence field reflects the quality of the underlying data: high when all annual accounts are recent and in full schema, moderate when some rubrics are missing.

Going further: see our guides on financial analysis via the NBB and on AML risk assessment for regulated professions.