<P> There are many forms of trade credit in common use . Various industries use various specialized forms . They all have, in common, the collaboration of businesses to make efficient use of capital to accomplish various business objectives . </P> <P> Trade credit is the largest use of capital for a majority of business - to - business (B2B) sellers in the United States and is a critical source of capital for a majority of all businesses . For example, Wal - Mart, the largest retailer in the world, has used trade credit as a larger source of capital than bank borrowings; trade credit for Wal - Mart is 8 times the amount of capital invested by shareholders . </P> <P> The operator of an ice cream stand may sign a franchising agreement, under which the distributor agrees to provide ice cream stock under the terms "Net 60" with a ten percent discount on payment within 30 days, and a 20% discount on payment within 10 days . This means that the operator has 60 days to pay the invoice in full . If sales are good within the first week, the operator may be able to send a cheque for all or part of the invoice, and make an extra 20% on the ice cream sold . However, if sales are slow, leading to a month of low cash flow, then the operator may decide to pay within 30 days, obtaining a 10% discount, or use the money for another 30 days and pay the full invoice amount within 60 days . </P> <P> The ice cream distributor can do the same thing . Receiving trade credit from milk and sugar suppliers on terms of Net 30, 2% discount if paid within ten days, means they are apparently taking a loss or disadvantageous position in this web of trade credit balances . Why would they do this? First, they have a substantial markup on the ingredients and other costs of production of the ice cream they sell to the operator . There are many reasons and ways to manage trade credit terms for the benefit of a business . The ice cream distributor may be well - capitalized either from the owners' investment or from accumulated profits, and may be looking to expand his markets . They may be aggressive in attempting to locate new customers or to help them get established . It is not in their best interests for customers to go out of business from cash flow instabilities, so their financial terms aim to accomplish two things: </P>

​trade credit is given by suppliers who sell goods on account