Essay On Advantages And Disadvantages Of Credit
The advantage of the credit to business is helping the owner of the business to acquire financial capital. To start a business need a large amount of money to buy the materials and capital. Credit to business can provide a financial capital to the entrepreneur. Moreover, the owner of the business, they need the credit to maintain and expand the business operation. For example, they can use the credit to pay the cost of administration and cost of utility or buying the new additional capital to increase the sales of the business. Briefly, the uses of credit can acquire capital assets to generate more income.
Credit card is able to using by the customer no matter the size of business. The advantages of the credit to business is expand markets which mean when the business have available credit on consumers the demand of
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In order to control the cost of credits a creditor must have a good system of information gathering and a good credit analysis. The credit management team should be capable of collecting background information of the borrower and estimate their capabilities of paying back the loans. The credit management team should also be well versed in managing the risk of loaning activities. Extra cost will be needed in order to hire professional workers for managing such activities.
Last but not least, one of the disadvantages of credit to business is the suppliers have the risk that the offering trade credit becomes bad debt. Bad debt means that the buyers are not afforded to pay back their money have been spending. It will cause that the supplier has a negative cash effect for a long period. For the unpaid accounts which are bad debt, it will decrease the profit in business. The operation might be affected if the supplier decided to suspend the process of trading until the earlier payment is
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