Trade credit
Credit one business extends to another by delivering goods or services now and accepting payment later, on agreed terms.
Trade credit is the default in B2B: most invoices are paid on terms such as Net 30 or Net 60 rather than upfront. Until it's paid, every invoice on terms is effectively an interest-free loan to the customer.
That's why receivables are often one of the largest assets on a company's balance sheet, and why how quickly they turn into cash matters so much for working capital.
Related terms
- Payment terms (Net 30)The agreed conditions for paying an invoice. Net 30, for example, means the full amount is due 30 days after the invoice date.
- Accounts receivable (AR)Money customers owe a business for goods or services already delivered on credit, recorded as a current asset on the balance sheet.
- Working capitalCurrent assets minus current liabilities: the short-term cash a business runs on, heavily shaped by receivables, payables and inventory.