Trade credit

Trade credit supports operating cash flow because the business can use or sell purchases before paying the supplier. Its economic cost depends on terms: stated prices may include financing, and declining an early payment discount can be expensive. Extending payment beyond agreed terms can damage supply continuity, reputation and credit standing, and may incur charges. The amount available usually depends on purchases and supplier confidence, so it is not unlimited permanent finance. Compare its maturity and flexibility with the business's cash cycle and other funding sources.