Trade Credit

Trade credit is a common arrangement in business-to-business dealings where a seller delivers goods or services immediately but allows the buyer extra time to make the payment. The agreed credit window—often 30, 45, or 60 days—gives the buyer breathing room to manage cash inflows while helping the seller maintain or expand sales without insisting on advance payment.

Example: Suppose a wholesaler sells goods worth ₹5,00,000 to a retailer and grants a 30-day payment period. The retailer can stock and sell the goods right away, settling the bill only after a month. This delays the cash outflow for the retailer while letting the wholesaler strengthen business ties.