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Trade credit is a free credit in the sense that nothing additional amount need be paid if the payment is made within the period of credit.
However it does not take into account the additional amount which will have to be paid if the cash discount was availed of.
I agreed that Trade Credit is free credit.
Trade credit is not free. It has a cost. Who bears that cost depends on the terms of the transaction between the grantor and the recipient of the trade credit.
trade credit may be free or may not
if the company make benefit from the trade credit it will be benefit
example of this : pay the credit in the due date which result in discount
but if company fail to pay credit in due date it will carry additional cost such cost of lately payment and fines
The Question arises on the variations of acquiring cost of a product or service till it is finally settled.
Yes, there are several products in Trade finance, where the bank does not provide the funds such as Letter of credit (documentary credit), acceptances, bonds and guarantees. These are non funded credit lines, where the bank charges commission and fees to their customers for risk bearing and guaranteeing to the International traders.
The answers given are correct and respected
I do not agree. While trade credit is an important aspect of doing business, it can be an expensive element as well. Depending on the terms of the agreement, the date can be changed and have penalties imposed for late payment or a discount can be given for early payment. When not handled properly, it can affect to higher operating costs and damage future commercial credit.
Trade credit exists when a firm buys goods or services from a supplier who does not require immediate payment. This type of credit is sometimes given to encourage sales.
Agree :It is free - if the buyer make payment of purchase before or in the due date also a supplier may give a discount, if the customer pays within a certain period of time. For example, a2% discount if payment is received within10 days of issuing a30-day credit. so it reduces the cost of goods or services purchased.
Disagree: It is costly- If firms fail to make payment within the full payment period, they may incur additional fees and charges for late payment or may be denied credit in the future. Under those circumstances, trade credit becomes costly form of financing.
Yes trade credit is a free credit as there is an agreement between supplier and customer to pay the debts in predefined time limit, e.g60 days. Trade credit very helpful to promote the business for both supplier and the customer.
