What are the merits and demerits of trade credit

1.	What are the merits and demerits of trade credit
Answer» Advantages of Trade Credit:The advantages of trade credits are:1. It is easy and automatic source of short-term finance.2. It reduces the capital requirement.3. It helps the business focus on core activities.4. It does not require any negotiation or formal agreement.Disadvantages of Trade Credit:Like other sources of finance, trade credit is also associated with certain disadvantages, which are as follows:i. Trade credit is available only to those companies that have a good track record of repayment in the past.ii. For a new business, it is very difficult to finance working capital through trade credit.iii. It is very expensive, if payment is not made on the due date.

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