---
tags: reference, terminology
---
# Trade Credit Club
A Trade Credit Club is a partucular framing for a mutual membership association of businesses which agree to use an internal accounting unit both to calculate each member's [Balance of Trade](/z-Jpc-QkSkScHWn7qUP1NA) with the association (the Club) as a whole and to accept that credits denominated in that unit will be accepted as payment. (typically pegged 1:1 with the local hard currency unit)

The term was introduced by [Mutual Credit Services](http://mutualcredit.services) in the autumn of 2020. The brief functional outline below is taken from [ Trade Credit Clubs in a nutshell]()

## HOW IT WORKS
1. **CONTINUOUS CLEARING**: Businesses come together by mutual agreement into a Trade Credit Club. Members agree:
1. to submit headline details of all invoices within the club to a 'Service Member' (at minimum: amount, date, reference, counterparty), whose role is to maintain a Club Ledger showing each member's balance in respect of the Club as a whole.
2. to consider each invoice settled in full once it has been entered into the Club Ledger.
3. to keep their balance on the Club Ledger within agreed ‘hard limits’ - a negative (maximum credit) and a positive limit (maximum exposure). Each members' limits must be acceptable to other club members.
4. to make or receive one cash payment to/from the club on Settlement Day - the end of a clearing period - to bring the Member’s balance back to zero (default period 3 days).
1. **PERIODIC SETTLEMENT**: Businesses agree to as long a settlement period as makes sense to them - the longer the period, the more risk, and on the other hand the more benefit to cashflow.
1. **MUTUAL CREDIT**: Businesses agree each to set 'soft' limits, positive and negative. Balances need only be brought to a position inside these limits on a Settlement Day (rather than fully zeroed).
1. **FEDERATION**: Clubs need to stay at human scale to ensure high levels of trust, while on the other hand the benefits improve with larger numbers. So Clubs federate - join together into networks of clubs - using exactly the same rules (each club has a group balance in the network ledger), so that quickly there are thousands of potential trading partners. Clubs remain fully autonomous, and their ledgers remain private.