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Is there a difference between US commercial and bank credit

 

Is there a difference between US commercial and bank credit

The difference between American commercial and bank credit in terms of the way of dealing and the mechanism gives companies and individuals wider options for financial transactions, one of them may be an alternative or complement to the other depending on the company’s economic situation and financial needs, and some companies use a mixture between the two concepts to facilitate financial transactions, but what is the difference Exactly, and how can the required treatment be determined?... These and other questions we will answer in our article according to the results of confirmed studies and research.

 

Is there a difference between US commercial and bank credit?

Commercial credit and bank credit differ in many details, although they both share the main idea of ​​providing loans to companies or individuals and facilitating business operations. The most important differences between them are as follows:

 

The cost:

The cost of trade credit increases in case of default; Because it imposes additional fees on the buyer, the bank credit increases the cost due to the interest charged on the loan.

 

Ease and ease:

A commercial loan is easier than a bank loan; Because business is between merchants and companies and depends on trust between them, where the method of payment is agreed upon, while bank credit requires providing more complex transactions; In terms of submitting the application to the financial institution, and then analyzing the request by the institution, analyzing the customer's situation, calculating the benefits and the payment mechanism, and these processes require a certain time to be completed.

 

Flexibility:

Trade credits are made by providing goods from the seller to the buyer and delaying the time of payment for a certain period. As for the banker, the customer is given sums of money to enable him to purchase certain goods; So Al-Tijari can be considered less flexible even though the same goods can be used as assets to get other loans.

 

Security:

Commercial credit does not require guarantees, but rather depends on trust between merchants, while banking often requires guarantees of the financial institution.

 

Trade credit

This credit is based on an inter-company b2b agreement; The first company can buy the goods from the second company without paying directly, and deferring the payment to a certain date, which may be 30, 60 or 90 days, and the transaction is recorded with a purchase invoice, and this is considered financing with an interest of 0%; It offers many advantages to the buyer and seller, centered around facilitating the buying and selling processes and stimulating commercial transactions.

 

Bank credit

It can be defined as the amount of credit or loan available to individuals, companies or businessmen in the form of money provided by the bank or banking institution, and it can also be defined as the total money that a person can borrow from a particular financial institution, and this loan depends on the borrower’s ability to repay the loan and the value of the loan. The loan, the interest and the time required to repay it, this type includes personal loans, car loans and mortgages.

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