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What’s the Difference Between Trade Credit and Bank Credit?

When looking at trade credit vs. bank credit, trade credit is a form of commercial financing where a customer buys goods now and pays the seller later. On the other hand, banks offer credit through a loan or line of credit. 

Trade Credit vs. Bank Credit – Key Differences:

  • Source of financing. In a trade credit arrangement, a seller extends credit to a buyer. Bank credit is the financing banks provide through a loan or credit line. 
  • Credit Terms. Repayment terms for trade credit may be a single payment due in 30 to 60 days. However, bank credit tends to be longer term; for example, spanning from 1-10 years. 
  • Application requirements. Banks look at business credit and financial history before providing financing. Trade credit considers a company’s relationships with its suppliers. It may be easier to get trade credit vs. bank credit.
  • Cost. When you borrow money from the bank, you pay interest. Most trading credit arrangements are interest-free unless customers make payments after the due date.


Trade Credit on Autopilot

Talk to our specialists to learn how Apruve can reduce fixed credit & A/R costs and team effort by over 50%.