This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Trade Credit Often There for the Asking

NEW YORK ( TheStreet) -- "Buy now, pay later" is a tactic retailers use to attract consumers.

Trade credit, or vendor credit, is the business-to-business take on that strategy, letting owners finance the purchase of supplies, merchandise, even equipment, typically between larger businesses and suppliers.
Trade credit, or vendor credit, could be a good financing alternative for small businesses.

What small-business owners may not know is that trade credit is probably available to them if they just ask for it.

"Smaller businesses generally haven't been aware that it's really there. It's something that I recommend to small businesses to explore when they're looking for financing," says John Seelinger, a business counselor with SCORE, a nonprofit association geared toward educating and helping small-business owners with their businesses. SCORE is a partner to the Small Business Administration.

Since bank loans are still hard to come by, despite more banks opening the spigots for small-business lending, trade credit could be a good alternative. It is generally cheaper and easier to get. Suppliers will likely require a credit check, but the agreements are usually not collateralized.

In the down economy, suppliers are "looking for sales too, and they're more interested in moving their merchandise," Seelinger says.

Industries in which trade credit is popular includes agriculture, automotive, construction, electronics, health service providers, medical equipment, manufacturing and retail, experts say. Recipients are often small businesses whose cash flow could vary significantly from month to month.

"Don't be shy to approach it with your supplier," Seelinger says to the owners of such businesses. So long as there is a good relationship between owner and supplier, they could be happy to provide trade credit -- typically short term, usually 30 to 60 days, but sometimes longer for heavy equipment or machinery. Terms are typically interest free for short-term arrangements, and some suppliers could even be amenable if the business owner needs more time to sell the goods.

At times suppliers will encourage early payment with incentives, such as discounts for invoices paid within a certain time, experts say.

"Cash flow is everything in a small company, so it's worth looking at anything that can help with that," says Alice Bredin, a small-business advisor to American Express' (AXP - Get Report) OPEN network.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AXP $63.89 -0.58%
EFX $120.02 0.60%
AAPL $93.16 -0.49%
FB $117.78 -0.24%
GOOG $700.92 0.75%


Chart of I:DJI
DOW 17,660.58 +9.32 0.05%
S&P 500 2,049.58 -1.54 -0.08%
NASDAQ 4,718.8410 -6.7980 -0.14%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs