Which benefit does trade credit provide to businesses?

Trade credit serves as a valuable form of short-term financing that allows businesses to obtain goods and services from suppliers without immediate payment. This type of credit allows companies to manage their cash flow effectively by delaying payments while still being able to meet their operational needs. By using trade credit, businesses can maintain liquidity, acquire inventory, and support ongoing operations while postponing out-of-pocket expenses.

This form of financing is particularly beneficial for businesses that may not have sufficient cash reserves or access to traditional loans, enabling them to take advantage of immediate purchasing opportunities without the burden of upfront costs. Trade credit essentially gives businesses the flexibility to balance their cash flow while providing the necessary resources to operate efficiently.