pls explain trade credit in more simpler words 

 

Trade credit is the credit extended by one trader to another for the purchase of goods and services. Trade credit facilitates the purchase of supplies without immediate payment. Such credit appears in the records of the buyer of goods as 'Sundry Creditors' or 'Accounts Payable'. Trade credit is commonly used by business organisations as a source of short-term finance. It is granted to those customers who have reasonable amount of credit extended, and depends on factors such as reputation of the purchasing firms, financial position of the seller, volume of purchases, past record of payments and degree of competition in the market. Terms of trade a credit may vary from one industry to another and from one person to another. A firm may also offer different credit terms to different customers.