Magazine article Business Credit , Vol. 106, No. 7
The financial panic of 1893 stunned business with its disastrous depression and subsequent severe deflation. The chemistry of credit was not understood and commercial failures reached record numbers.
So serious was the problem that a "Congress of Credit, Collections and Failures" was held as part of the 1893 Great Exposition in Chicago. That meeting, in turn, led to the further exploration of ways for credit practitioners to help each other.
In June of 1896, 82 delegates from several local credit groups met in Toledo to endorse a national movement, creating what is now the National Association of Credit Management. Membership has grown from 600 at the end of 1896 to more than 22,000 today, making NACM one of the oldest and largest business credit organizations in the United States.
NACM is committed to enhancing, promoting, and protecting the many credit management interests of the commercial credit grantor. NACM represents business credit grantors in all industries, including manufacturing, wholesaling, service industries, and financial institutions. NACM is a member-owned association, which exists solely to serve and support its members.
The purposes and objectives of NACM are:
* to promote honesty and integrity in credit transactions;
* to assure equitable laws for sound credit practices;
* to foster and facilitate the exchange of credit information
* to encourage efficient service in the collection of accounts;
* to provide credit education through colleges, universities, home study courses, NACM and NACM Affiliates;
* to promote and expedite sound credit administration in international trade;
* to foster and encourage research in the field of credit;
* to disseminate useful and instructive information and ideas with respect to credit management techniques and policies;
* to promote economy and efficiency in the handling of estates of insolvent or bankrupt debtors;
* to provide facilities for the investigation and prevention of fraud; and
* to perform and encourage such other functions as the advancement and protection of business credit may require.
What Is Business Credit?
Business credit is an integral part of the American economy. The business credit executive--the NACM member--is an essential participant in our free enterprise system. Virtually every business transaction that concerns another business involves credit.
Business credit is the single largest source of business financing by volume, even exceeding bank loans. It should not be confused with consumer credit, credit cards, venture capital, commercial loans, or credit unions. In this context, business credit is the credit extended between businesses and the fuel that drives the engine of today's business economy. Business credit is extended from one business to another for the purpose of acquiring goods that will eventually be resold, or items that will be used to make goods for resale, or to provide services among companies. Without business credit, America's economic system, as we know it, would not exist. Business credit is, in reality, the capital required to conduct business. Billions of dollars worth of goods and services are transacted daily through the business credit process.
The differences between business credit and consumer credit are much more than simply a question of who gives and receives credit, or for what purpose the purchases are employed. The following should be considered:
* the dollar amount of business credit extensions is usually much larger than that of most consumer credit transactions;
* most business credit transactions are conducted on an unsecured basis;
* timeliness in reaching a decision about whether to extend credit is often much more crucial in the business setting. For example, delays in the manufacturing process can increase costs and reduce the quality of perishable goods;
* whereas consumers usually open charge accounts with a credit limit agreed upon in advance, business credit grantors face a never-ending responsibility of credit judgment that retailers alone do not face with respect to their credit recipients. …