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GCSE Business · key term
An agreement allowing a business to receive goods from a supplier and pay for them later.
Used by AQA, Edexcel and OCR
Paper 2
Revise: Raising Business FinanceWith trade credit, a supplier provides goods now and allows the business to pay later, often after about 30 days. It is usually interest-free if payment is made within the agreed terms.
Specification 1.3.4 · Paper 1
An arrangement in which a supplier allows a business to receive goods now and pay for them at an agreed later date.
Revise: Sources of Business FinanceTrade credit is an agreement to receive goods from a supplier now and pay later, commonly within 30 to 90 days. Unlike an overdraft, it does not put borrowed cash into the business’s bank account. Instead, it delays a cash outflow.
Paper 2
An arrangement allowing a business to receive goods or services from a supplier and pay for them later.
Revise: Role of ProcurementFor example, a supplier may offer trade credit, allowing the buyer to receive supplies now and pay later.
An agreement allowing a business to receive goods from a supplier now and pay for them later.
Trade credit delays payment to suppliers; it does not provide cash to spend on wages or other bills.
Trade credit delays payment for goods. It does not put a cash loan into the business’s bank account.
Remember that sole traders cannot issue shares, and trade credit delays payment for goods rather than providing cash to spend on anything.
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