Limitations of credit selling
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it can lead to bad debts. There is no guarantee that the customers will pay back. ...
Loss of income/capital. Bad debt is a loss of income as well as loss of capital you have invested in buying the goods. ...
Liquidity problems. ...
Strained relationship.
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1
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Disadvantages of Trade Credit
Offering credit terms to customers will directly affect your cash flow. ... You could do this by obtaining credit from your bank (e.g. an overdraft, invoice discounting, etc) or increasing credit terms from your suppliers. Taking a credit risk with customers.
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