Trade Credit is defined as

• A. A method of marketing research.
• B. Credit extended by suppliers allowing businesses to buy now and pay later.
• C. A guarantee of product performance.
• D. A personal loan from a bank to cover operating expenses.

Answer: (B)

Trade credit is credit extended by suppliers allowing a business to receive goods or services now and pay for them later. It’s a common short-term financing arrangement that helps manage cash flow and inventory, with payment terms such as 30, 60, or 90 days, sometimes accompanied by a discount for early payment. This form of financing stays with the supplier and typically doesn’t involve interest like a bank loan would, making it a flexible way to fund purchases tied to operations. It differs from a bank loan or line of credit, which come from a financial institution and often carry interest, and from marketing research or product guarantees, which are not about financing purchases.