Set a new buyer's limit as the lower of (a) what your business could absorb if the buyer never paid and (b) what the buyer's checks justify. Start small, with short terms, and raise the limit only after several invoices are paid on time. FundRaksha Trust suggests terms in every full report (safe, give credit with care, or avoid) and keeps receivables and credit limits for free.
Start from what you can afford to lose
Before looking at the buyer, look at your own books. If this buyer paid nothing, how much could you lose without missing salaries, a GST payment or a supplier of your own? That figure is the ceiling, however good the buyer looks. For many small suppliers it is far lower than the order the buyer is asking for, which is exactly the point.
Remember that exposure builds. A buyer with a ₹2 lakh limit who orders every two weeks on 45-day terms can owe you three or four invoices at once. The limit should cover the whole outstanding, and new orders should wait if it is reached.
Adjust for what the checks show
| What the checks show | Starting limit | Terms |
|---|---|---|
| Active GSTIN for years, regular filing, no court cases or reported defaults, good owner score | Up to your ceiling | Normal credit period |
| Clean record but a young business, or a few late returns | A fraction of your ceiling | Shorter period, part advance |
| Missing returns, cheque bounce cases, or supplier-reported defaults | Nil | Advance or cash on delivery |
| Buyer refuses checks or consent | Nil or very small | Advance until a history builds |
The Trust reports gather these signals: GST status and business age, filing record, supplier defaulter reports, payment history with FundRaksha suppliers, pending dues cases and the owner's score and recent delays. The decision is guidance; you set the number.
Step up after on-time payments
- First order: well inside the starting limit, on short terms.
- After the first two or three invoices are paid on time, raise the limit by a step you are comfortable with.
- Re-check the buyer before any large increase, or when payments slow.
- Cut the limit back as soon as a payment is significantly late, and do not ship new orders against overdue ones.
Write the limit and the date it was set in your buyer master. A sales team that knows the limit cannot be talked past it as easily.
Worked example
A Chennai auto-component job-worker with monthly sales of about ₹30 lakh decides it could absorb a loss of ₹3 lakh from any one buyer. A new tier-2 supplier in Oragadam asks for ₹6 lakh a month on 60 days. The Trust report is "give credit with care": GST is regular but one recovery suit is pending. The job-worker sets a ₹2 lakh limit on 30 days, with the rest of each month's work against payment on delivery. After four months of on-time payment it raises the limit to ₹3 lakh. See give credit or ask for advance.
Sources
Last reviewed: 2026-10-21. Information for Indian businesses; not legal advice.