Trade credit is provided by __________.

Correct option is B

Trade credit is a short-term source of finance provided by the supplier of goods or services. It allows the buyer to purchase goods on credit and make payment at a later date, usually within 30 to 90 days. This facility helps businesses manage their working capital, especially when immediate cash is not available.
Suppliers extend trade credit to encourage sales, build long-term relationships, and support customers’ liquidity needs. It is a spontaneous source of finance, meaning it increases automatically with the level of purchases.
Thus, the correct answer is (b) Supplier.
Information Booster
1. Trade credit appears as accounts payable in the buyer’s balance sheet.
2. It is one of the most widely used short-term financing methods in business.
3. No formal documentation is usually required unless credit limits are large.
4. Trade credit cost is implicit—buyers may lose cash discounts when paying later.
5. It improves liquidity but excessive dependence may weaken supplier relationships.
Additional Information
· (a) Commercial Bank: Banks provide loans, overdrafts, and cash credit—not trade credit.
· (c) Buyer: Buyers receive trade credit; they do not provide it.
· (d) Development Bank: These provide long-term project financing, not trade credit.