Which of these is the best example of trade credit?

Question

Responses

A plumbing company decides to only accept credit cards.

A potato chip factory uses electronic transfers to pay employees.

A textile factory pays for a large fabric order over several months.

A pretzel store wants to open a second location and needs a bank loan.

Answer 1

The best example of trade credit from the given options is:

A textile factory pays for a large fabric order over several months.

Trade credit refers to the agreement between businesses to buy and sell goods and services on account, meaning that payment is deferred to a later date. In this case, the textile factory is essentially receiving goods (fabric) and agreeing to pay for them over time, which aligns with the concept of trade credit.