What is a Trade Credit?
$1 of Trade Credit = $1 in Cash
- CBA buys overstock or excess inventory with Trade Credit.
- Trade Credit can be used as partial payment for budgeted goods or service expenses.
- Examples are Logistics, Media, Raw Materials, and Capital Equipment.
- Example of spending Trade Credit: A client spends $3M annually on ocean freight. Using Trade Credit as partial payment, they could pay $2.7M in cash and then $300k in Trade Credit, thus saving $300k in cash flow.