Credit Policy for Irregular Incomes

Business management is often faced with irregular revenue streams. However, the normal functioning of a business entity must make regular and consistent payments that are necessary to produce the goods. To maintain a possible and necessary level of operating capital, the business entity uses credits and loans that solve the problem of lack of financial resources. Repayment of credits and loans is done with irregular credit installments, which is a function of irregular income. This study makes quantitative assessments of the levels that a business entity’s credit policy can afford. These levels are based on the current and previous repayment sequence that the business has implemented. A formal modeling of this assessment is given, which defines the maximum level of credits that the business entity should use. The model is illustrated numerically and proven empirically with business data for livestock management.