Trade Credit

What is Trade Credit?

Trade credit is an arrangement in which a supplier allows a buyer to purchase goods or services and defer payment to a later date — effectively extending a short-term loan to the buyer. It's one of the oldest and most common forms of B2B financing, used by businesses of all sizes across every industry.

How Trade Credit Works

When a supplier extends trade credit, the buyer receives the goods immediately but doesn't pay until the agreed-upon due date (typically Net 30, 60, or 90 days). The supplier records the transaction as an account receivable, and the buyer records it as an account payable. No formal loan application is required — the terms are based on the business relationship and the supplier's willingness to extend credit.

Modernizing Trade Credit

Traditional trade credit is being transformed by fintech platforms that automate the process. Instead of suppliers individually managing credit risk and collections, third-party providers handle credit decisioning, fund the supplier upfront, and collect from the buyer over time. This modernization makes trade credit more accessible, scalable, and risk-free for suppliers.

Key Takeaways

• Trade credit lets buyers pay suppliers at a later date
• It's essentially a short-term loan based on the business relationship
• Common terms include Net 30, Net 60, and Net 90
• Modern platforms automate trade credit with instant approvals and risk management