Trade credit

• What is trade credit?

  Buying now and paying later
• What are the typical payment terms for trade credit?

  30 to 60 days, sometimes 90 days
• What is known as the credit terms?

  The days to repay your supplier
• Why is trade credit considered a short-term source of finance?

  It is typically repaid within a few months
• Who primarily uses trade credit?

  New and startup businesses
• Can established businesses use trade credit?

  Yes, established businesses can use it
• What are the pros of using trade credit?

  • Simple to arrange
  • Maintains supplier relationships
  • Cheaper than overdrafts
  • No loss of business control
• What are the cons of using trade credit?

  • Risk of spoiling supplier relationships
  • Potential for large fines
  • Credit risk if payments are late
  • Long-term consequences for business
• What could happen if you fail to make payments on time?

  You may spoil your relationship with suppliers
• What is credit risk in the context of trade credit?

  The risk of not making timely payments
• What is a potential consequence of not adhering to credit terms?

  You could face a large fine
• How can late payments affect your business in the long term?

  It may lead to loss of suppliers
• What is the main benefit of maintaining credit terms?

  It allows for repeated transactions
• How does trade credit compare to an overdraft?

  Trade credit is usually cheaper than overdrafts