A creditor is a person, company, organization or government (a party) that is owed money. The creditor has provided goods, services or money to another party, under the assumption that the other party will return the equivalent good, service or money at a future date.
When somebody takes out a loan with a bank, the creditor is the bank and the borrower is the debtor.
A company’s employees may be creditors when the firm owes them wages and bonuses, as are governments (owed taxes).
Money owed to creditors are reported on a firm’s balance sheet as liabilities. If the company had to sign a promissory note for the quantity owed, it will record and report the amount as Notes Payable. If there was no promissory note, it will be reported as Accounts Payable.
Creditors have lent money, while debtors borrowed.
The term ‘creditor’ comes from the word ‘credit’, which in the financial and business world means the lending of money, a good or service.
Creditor in Spanish is acreedor, Portuguese – credor, French – créancier, Italian – creditore, German – Gläubiger, Russian – кредитор, Japanese – 債権者, and Chinese – 债权人.
A lender who has a lien or other legal claim to the debtor’s assets is known as a secured creditor. Unsecured creditors have no recourse to debtors’ assets.
According to the Financial Times Lexicon, a creditor is:
“A person or organization that has provided credit and is owed money. The opposite of debtor.”
Personal and real creditors
Personal creditors: people who lend money to family or friends.
Real creditors: businesses such as banks or finance companies that have legal contracts with borrowers. In most cases they are secured creditors.
Video – Debtor vs. Creditor (definition)