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How to get trade credit and reasons for trade credit

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How to get trade credit and reasons for trade credit

October 16
18:02 2019

Trade credit is a financing option for small business in different industries. The funding option is designed to make it easy for businesses to buy products and supplies from other companies without having to pay for the supplies immediately. Sellers that grant trade credit to their customers generally offer them a period between 30 and 120 days to settle their accounts depending on the industry and individual seller.

Users of trade credit and reasons

Trade credit has become increasingly popular in recent times, particularly after the financial collapse in 2008, causing traditional lenders to tighten their belts and lend fewer dollars to small businesses. While there are several funding options available to businesses, small businesses across different industries seem to prefer using trade credit to meet their funding needs due to the relative difficulty in accessing fund from other sources like banks. This has led businesses to ask the question “What is trade credit?”

Any business can use trade credit to accelerate their cash flow. Examples of the more common businesses that use trade credit are cleaning services companies, creative agencies, accountants and bookkeepers, commercial landscaping businesses, and clothing companies. Other businesses that can use trade credit include restaurants, breweries, construction businesses, manufacturing companies, wholesalers, and retail companies.

Pros of using trade credit

  • Trade credit can ease the cash flow worries of businesses.

  • More businesses can get access to funding for operations.

  • No extra fees for prompt payment. 

  • Customers are almost always happy. 

  • Build long term relationships with suppliers. 


Cons of using trade credit

  • Trade credit can be relatively expensive particularly when businesses are unable to capitalize on early payment discounts.

  • Significant late payment penalties can apply if accounts are not settled on time.

  • Trade credit can put relationships at risk.

  • Trade credit is only available to established businesses.

Media Contact
Company Name: Funding Box Company
Contact Person: Viola D. Hayes
Email: Send Email
Address:4450 Elmwood Avenue
City: Philadelphia
State: PA
Country: United States
Website: fdbox.com