What is trade credit? One of the main differences between commercial and consumer transactions is that most if not all, consumer transactions are paid in cash or by credit card at the time of sale. Because of this, never more consumer companies have to worry about extending credit to a customer and can run its operations in an "all cash basis." This allows them to focus on their core competencies, because they have to carry slow paying accounts receivable and go through the cost of collecting these accounts. However, commercial transactions are different. Most clients ask their suppliers to deliver services immediately and then invoice for the work, payable 30 days later (also known as a network that offers-30). In effect, clients ask their suppliers to provide "trade credit" for 30 days.
While providers do not like offering trade credit, most have accepted as a standard the industry and have learned to manage and live with it. In fact, some vendors have mastered how to offer trade credit and use it to better position their companies' main customers. Large creditworthy customers, such as government or large companies, usually demand trade credit as part of their contract negotiations. Some examples of entities that ask for 30 to 60 days payment terms are as follows: either the Fortune 500 or large and medium enterprises or agencies of state government or federal government agencies On the positive side, the business credit the right customers can be a tool that allows your company to win important contracts and position for growth.