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					Trade credit
Total credit refer to balance owed to supplies. It is
spontaneous financing source since it comes from
normal operations trade credit is the least
expensive form of financing inventory
The benefits of the trade credit are
  It us readily available, since supplier want
  Interest is typically is not demanded
It is convenient
  A company having liquidity problem may
   stretch its accounts payable
Types of the trade credit
  Open account
  Notes payable
  Trade acceptance
Open account
Is the most common kind, it is from seller to the
buyer this invoice specifies the good shipped the
total amount due, the term of the sale. Open
account appear on the buyer balance sheet as AP.
Notes payable
In some situation notes are issued instead of open
account credit, the buyer sign a note that evidence
as a debit to the seller
Trade acceptance
Under this arrangement the seller draw a draft on
the buyer, ordering the buyer to pay the draft at
some future date, the seller will not release the
goods until the buyer accept the time draft,
Bank loan
To be eligible for a balance loan, a company must
have a sufficient equity and good liquidity when a
short term loan is taken the debtor usually sign a
note, which is written statement that borrowers
agree to repay the loan at the due date, a note
payable may be paid at maturity or in installments.
Bank loan are not spontaneous financing as it trade
credit, borrows must apply for loan and lenders
must grant them,
 Bank financing may take any of the following form
  Secured loans
  Unsecured loans
Secured loans
These are self liquidity this kind of loan is
recommended for the use by the companies with
excellent credit rating for financing project that
have quick cash flow they are appropriate when the
farm must have immediate cash and can either
repay the loan in the near future or quick obtained
longer term financing
It made for the short term, it caries a higher interest
rate then a secured loan
Secured loan
If a borrower’s credit rating is deficient the bank
may lend money only on secured basis that is with
some form of collateral behind the loan collateral
may take many form including inventory
marketable securities or fix assets,

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