Why might a seller extend Commercial Credit to a buyer?

The reasoning behind extending commercial credit to a buyer primarily revolves around allowing the buyer time to pay. When sellers offer credit terms, they enable buyers to acquire goods or services without the immediate financial burden of payment. This flexibility is particularly beneficial for buyers who may need time to generate the cash flow necessary to settle their accounts after the sale. By granting this extension, sellers can enhance customer relationships, encourage repeat business, and ultimately drive sales growth.

The practice also reflects an understanding of cash flow management from the perspective of the buyer, as it lets them manage their finances more effectively while still obtaining necessary products or services. Thus, the primary motivation for extending commercial credit is to support the buyer's payment timeline and foster a favorable purchasing process.