Working Capital In Times Of Financial Crisis: Three Trade Credit Strategies

Credit is a difficult issue these days. In the US, firms generate more than 15% of their financing from accounts payable. Internationally, these levels can be even higher. And since more than 80% of transactions are vendor financed, parts makers and other companies are rightfully worried about getting paid. Whereas in most cases the supplier has already been reimbursed, these companies have to bear the costs until such time as the customer pays. This financial gap is known as net trade credit, which together with inventory, forms the major component of working capital.