Vendors extend trade credit when they deliver product without demanding immediate payment.

Vendors often offer trade credit as a way to encourage customers to buy more products or to build a relationship with them. Trade credit allows customers to pay for the products at a later date, typically within 30, 60, or 90 days, without facing any penalties or interest charges. This arrangement benefits both the vendor, who can increase sales and customer loyalty, and the customer, who can obtain necessary products or services without having to pay for them upfront.