What is trade credit in business studies?

Trade credits are offered to suppliers when they deliver their products and agree to wait a short period of time before they receive payment. Trade credits are considered a type of external finance from short-term sources.

For organizations, there are different types of finance options that they can rely on to get the equity that they need to operate. These include short-term options, which must be paid back within a year on average, and long-term options, which can be paid back in a number of years at a term set by the person or organization offering the financing. Examples of long-term finance include mortgages and grants.