Trade credit意思

"Trade credit" is a term used in accounting and finance to refer to the practice of allowing a customer to purchase goods or services without immediate payment. Instead, the customer is given a period of time, often 30, 60, or 90 days, to pay for the goods or services. This type of credit is commonly used in the business-to-business (B2B) context, where suppliers extend credit to their business customers.

Trade credit is a form of short-term credit that allows businesses to manage their cash flows more effectively by delaying payments to suppliers. It can also be a source of financing for businesses that do not have access to other forms of credit, such as bank loans or lines of credit.

From the supplier's perspective, extending trade credit can be a way to attract and retain customers, as it can be more convenient for businesses to take advantage of credit terms rather than having to come up with cash immediately to make a purchase. However, suppliers also face the risk of non-payment if the customer is unable or unwilling to pay for the goods or services by the due date.

To manage the risk of non-payment, suppliers may use credit scoring or credit insurance to assess the creditworthiness of their customers, and may also implement policies such as requiring payment in advance, charging interest on overdue accounts, or limiting the amount of credit extended to individual customers.