Definition:

Trade credit is the process of buying equipment and supplies for your business start-up from suppliers or vendors, letting them finance your purchases. In other words, trade credit is “buy now, pay later.” Some suppliers call this an "open account," because they keep your account open and you can buy from them on credit as long as you continue to pay regularly.

For example, you could go to an office supply business and set up an account and buy your office furniture, computer, and office supplies from this company.

The vendor would require you to fill out a credit application and use the vendor's own credit card or financing company to check your credit and offer you financing terms. Trade credit can also be used to buy inventory for your startup.

Also Known As: veendor credit, open account