Decision Diagnostics Corp (DECN)

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What is "trade debt financing

This question must arise about companies that do not have businesses, companies like TAUG for example. Successful companies often have several trade lines of credit. If and when a company has a real business, the CEO likes to manage cash flow needs with trade debt financing by entering into a credit arrangement with a financial institution such as a commercial bank, in the business of lending money and using the product of that money, finished goods, as collateral. The word trade means that the need for the debt arrangement is for commerce. CEOs often borrow other people's money to pay in advance (because terms are almost always better) for goods such as inventory, even component goods. The technical definition of trade debt is:

Trade debt financing is a deferred payment arrangement whereby a buyer is allowed for a certain period of time in which to pay for products (inventory) to manufacture them or after receiving them.

DECN claims to need $56 million of trade debt financing. The company would know. Trade debt arrangements refer only to the financing of goods to be put into commerce and does not refer to equity arrangements of any kind with anyone. Banks, for example, offer multiple types of trade debt financing such as inventory financing, receivables financing, purchase order financing etc.