The merits of trade credit are as follows :
- Simplicity : The operation of trade credit method is very simple. It requires just an understanding of
: the seller of items required by a buyer who wants to avail trade credit.
- No charge on assets: Trade credit facility is available without creating any charge on the assets of the company. Thus, it increases credit worthiness.
- No extra financial burden: Trade credit is available without any interest. Interest is charged only in the case of delay in payment of trade credit.
- Flexibility : It is a flexible source of finance. The
amount of trade credit may be adjusted according to the need of the buyer.