How bank credit overcomes the limitations of business credit

Mainly in terms of scale and direction of use.

1) The difference between commercial credit and bank credit: both commercial credit lenders and borrowers are enterprises, the object of lending is commodities, and lending behavior is closely related to commodity trading, but it has limitations in scale and direction of use. The bank credit borrower is a corporate lender, a bank or a financial institution, and the object of credit is money, and the scale and direction of use exceed the limitations of commercial credit.

2) The connection between commercial credit and bank credit: commercial credit is the basis of bank credit and even the entire credit system, because commercial credit precedes bank credit, and bank credit is developed on the basis of the widespread existence of commercial credit, and at the same time, enterprises give priority to commercial credit when choosing credit; Bank credit is dominant, because it overcomes the limitations of commercial credit, and at the same time, with the acceptance and discount of commercial paper by bank credit, it is also conducive to the development of commercial credit.

Bank credit is the credit provided by banks or other financial institutions in the form of money, which is indirect credit. It overcomes the limitations of commercial credit and is widely present in various economic sectors. (1) Through deposit activities, banks gather idle monetary funds in the society and aggregate them into large monetary funds, which can meet the needs of small funds and large credit funds, and overcome the limitations of commercial credit in terms of credit scale.

It is a modern form of credit that can adapt to the needs of socialized large-scale production; (2) Bank credit is provided in the form of monetary funds rather than in the form of commodities, which overcomes the limitations of commercial credit in the direction and enables the flexible use of social funds; (3) The funds absorbed by the bank are both long-term and short-term idle, and have flexibility in the term of adjustment of funds, which can meet the different needs of depositors and loans. Overcoming the limitations of commercial credit in terms of term.

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Limitations of Business Credit: Scale; Direction; Bill acceptance; The term is short.

Characteristics of bank credit: indirect credit; The object is idle capital; It has a wide range of acceptability.

The limitations of commercial credit are mainly manifested in ( ).

Small scale and short term.

Narrow range, spontaneous dispersion.

Limitations of Commercial Credit Because commercial credit is a credit relationship between functional capitalists, it has great limitations. Specifically, the scale of commercial credit is limited by the amount of capital owned by a single functional capitalist. The scale of commercial credit is also limited by the speed of capital turnover, and the scope of commercial credit is also limited by the direction of commodity circulation.

1.Limitations of scale: mainly susceptible to the impact of the number of goods and the scale of products of some enterprises;

2.Limitations of direction: commercial credit is mainly a transaction carried out by capitalists, usually provided by the seller to the buyer, and the direction of commodity circulation is very fixed;

3.Limitation of term: The development of commercial credit depends on the production and circulation of commodities, and the time period is very limited, so most of them are short-term credit.

Further information: Commercial credit refers to the lending relationship between enterprises formed due to deferred payment or advance receipt of goods in commodity transactions. Specific forms include accounts payable.

Notes payable, accounts receivable in advance.

Wait. Advantages and disadvantages of commercial credit financing:

Advantages: The biggest advantage is that it is easy to obtain. If there is no cash discount.

or the use of non-interest-bearing notes, commercial credit financing does not bear the cost.

Cons: Higher cost when giving up cash discounts.

The main forms of commercial credit are: purchase of goods on credit, advance receipts and commercial bills.

Commercial credit is a social credit system.

One of the most important components of the country, because of its great externality, influences the development of other credits to a certain extent. From a historical perspective, traditional Chinese credit is essentially a moral concept, which consists of two parts, one part is the private credit of the self-sufficient identity-based acquaintance society, and the other part is the commercial credit of the interdependent contract society.

Private credit due to Confucianism.

Establish an institutionalized system of law and practice, gradually penetrate into customs through transmission, and through the interaction between power, truth and system, the Chinese have accepted this concept. However, due to the lack of social practical basis, no corresponding theory to prove its rationality, and lack of legitimacy without institutional support, commercial credit is in a natural state of anomie. The business ethics cultivated by this contract society, which is based on equality and mutual benefit and marked by honesty and trustworthiness, lack a social foundation for the existence of the identity society.

In essence, business credit is business trust and praise based on subjective honesty and objective fulfillment of promises. The so-called subjective honesty refers to the fact that in business activities, the parties to the transaction are subjectively and psychologically honest and bona fide, and there is no other fraudulent intent and purpose except for the concept of fair trade; The so-called objective fulfillment of a promise means that a commercial entity should be responsible for the effective expression of intent it makes to the other party in the transaction, and should make it actually fulfill. It can be said that commercial credit is the unity of subjectivity and objectivity, and is the embodiment of the consistency of subjective intention and objective behavior of commercial entities in commercial activities.

No. Commercial banks cannot create credit without limit, still less can they create credit out of thin air, and they must be constrained by the following factors:

The credit creation of commercial banks should be based on original deposits;

The credit creation of commercial banks is subject to the ** bank statutory reserve ratio.

and the constraints of the cash leakage rate, and the ability to create is inversely proportional to it;

The condition for creating credit is that there must be a demand for loans, and if there is not enough demand for loans, deposits cannot be loaned, and there can be no talk of creation. Therefore, the amount of deposits absorbed by commercial banks is of great significance.

No. It is affected by factors such as reserve requirement ratio, cash leakage, etc.

Unlimited is impossible.

1. Limitations of scale: mainly it is easy to be affected by the quantity of goods and the scale of products of some enterprises;

2. Limitations of direction: Commercial credit is mainly a transaction carried out by capitalists, which is usually provided by the seller to the buyer, and the direction of commodity circulation is very fixed;

3. Limitation of term: The development of commercial credit depends on the production and circulation of commodities, and the time cycle is very limited, so most of them are short-term credit.

Business Credit and Bank Credit Profiles.

1. Commercial credit refers to the loan relationship between the buyer and the seller when a commodity is traded because of deferred payment or advance receipt. This borrowing and lending relationship is formed with the circulation of commodities and does not last long. Generally, commercial credit mainly depends on the production scale and capital status of the enterprise;

2. Bank credit refers to the use of banks as intermediaries, with banks providing creditworthiness, and then raising funds for the entire public, and then lending the funds raised to some enterprises and individuals with good credit qualifications. Banks mainly use borrowed deposits to flexibly operate funds, and the credit of banks is more secure.

Commercial credit refers to the degree of credibility and trustworthiness of an enterprise in the course of business transactions. However, there are also some limitations to business credit, including:

1.Subjective limitations: Business credit is based on subjective judgment and the establishment of personal experience, involving trust and cooperation between the buyer and the seller. This means that business creditworthiness is the result of a subjective assessment, and there may be individual differences and opinion biases.

2.Information asymmetry: The establishment and maintenance of business credit requires both parties to share information about the business. However, sellers usually have less access to buyer information, which may lead to the problem of symmetry of information keys, increasing the risk of default and transaction uncertainty.

3.Influence of external factors: Business creditworthiness may be disturbed and affected by external factors.

For example, changes in the economic environment, industry changes, policy adjustments and other factors may lead to changes in the financial status of enterprises, which may affect the assessment and trust of business creditworthiness.

It should be noted that commercial credit has its importance and practical application value, but other factors such as contractual constraints, guarantee methods and legal protection are also required to be comprehensively considered and evaluated in commercial transactions to ensure the smooth progress of transactions and risk control.