Is Trade Credit Long Term or Short Term?

What do you know about Trade credit? Is there any legal issue? To find out the answers to this question here, we discuss trade credit and how it works for any business. Trade credit is a credit which allows a company to exchange their goods and service without paying immediate cash or cheques. When any business enters trade credit management, there is a limit set with their suppliers which are called credit terms. There are many advantages of trade credit management service for buyers as well as for suppliers. So, let’s discuss this.

Advantages of trade credit for a buyer

1. Low-cost finance: 

It is the cheapest form of investment. In trade credit management, you don’t need to pay an interest cost to your supplier.

2. Discounts on early payments: 

Here you will get a discount if you paid before the time-period.

3. Hassle-free sanction: 

One of the important reason behind the popularity of trade credit is that it is effortlessly available to the business. There is no unique process to get this credit.

4. Maintain easily: 

Maintaining a trade credit is not a big thing. You need to pay a little effort to make a timely payment.

5. No legal issues: 

Trade credit is free from any legal issues because here banks are not involved. So, there is no fear of legal problems.

Advantages of trade credit for a seller

1. Improved sales: 

Through this process, a supplier can improve his sales and business by trade credit management services.

2. Improved margins: 

Most of the time, the cost of extending credit is higher, which is charged by the supplier.

Conclusion

The credit terms vary with business to business and industry to industry. The trade credit management services have many advantages for both sides of the seller and buyer.It is the most comfortable and most important source of short term finance available for any business.