What is the definition of Commercial Credit?

Commercial credit is defined as a short-term credit facility that a seller provides to businesses, allowing them to purchase goods and services on credit with the agreement to pay it back within a specified period. This form of credit is essential for businesses to manage their cash flow and finance inventory or operational expenses without immediately depleting their cash reserves.

The nature of commercial credit typically involves short repayment terms, often dictated by the seller's policies and the nature of the goods sold. It is particularly useful in retail and wholesale transactions where immediate cash flow is vital for business operations.

By allowing businesses access to credit, sellers can encourage larger sales and foster ongoing relationships that enhance customer loyalty. In contrast, options related to long-term agreements, real estate loans, or investments do not accurately represent the essence of commercial credit as focused on immediate transactions and operational financing.