What is the Difference between Trade Credit and Bank Loans?

The difference between trade credit and bank loans include the following:

  • Parties Involved. In trade credit, customers transact directly with the supplier to apply for trade credit. Meanwhile, to get a bank loan, you need to transact with a lender. 
  • Credit Qualification. Bank loans are typically the most difficult to qualify for when compared to lines of credit. 
  • Payment terms. Payment terms for trade credit are typically a one-time payment due in 30 to 45 days. Meanwhile, bank loans tend to have a longer term, ranging from 1-10 years.

Cost. Trade credit is interest-free, while bank loans charge interest on the amount owed. Sellers typically extend payment terms without interest to attract customers. Trade credit can also lead to more sales and customer loyalty.


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