Trade credit is an agreement where a customer can purchase goods without paying cash up front, instead paying the supplier within an agreed upon timeframe, usually 30-90 days. It provides short-term financing for businesses as suppliers extend credit to customers to purchase goods and services, allowing for deferred payment. Trade credit is an important source of working capital financing for companies as it reduces their capital requirements and is an automatic and easy source of short-term funds without requiring formal agreements.

1. TRADE CREDIT

2. WHAT IS A TRADE CREDIT
• A trade credit is an agreement where a customer can
purchase goods on account (without paying cash), paying
the suppliers at a later date. Usually when the goods
delivered, a trade credit given for a specific number of days -
30, 60 or 90. jewelry businesses sometimes extend credit to
180 days or longer.
• Trade credit is essentially a credit a company gives to
another for purchases of goods & services

3. MEANING OF TRADE CREDIT
• Trade credit is an important external source of working
capital financing. It is a short term credit extended by
suppliers of goods & services in the normal course of
business, to a buyer in order to enhance sales.
• Trade credit arises when a supplier of goods & services
allows customers to pay for goods and services at a later
date. Cash is not immediately paid & deferral of payment
represents a source of finance.

4. ADVANTAGES OF TRADE CREDIT
•It is easy and automatic sources of short term
finance.
•It reduces the capital requirement.
•It helps the business focus on core activities.
•It does not require any negotiation or formal
agreement