Commercial credit. Commodity loan. Differences and advantages.
The basis of financial relations betweenenterprises and organizations is a commodity and commercial form of lending. Sometimes it is much more profitable to attract a business loan than to withdraw money from one's own turnover. Especially for small commercial enterprises with low solvency this formdoing business is the most acceptable. Very often they confuse two such concepts: commodity and commercial credit. But the difference between them exists.
According to Article 822 of the Civil Code of the Russian Federation, this form of lending is a loan obligation under terms of one party for anothergoods, determined by generic characteristics. The opposite side guarantees the return of the goods in the agreed period of the same kind and in the same amount. Such a contract is reimbursable, which implies the ability to establish interest for the use of the goods. The form of interest can be arbitrary: both monetary and natural. Such a loan agreement is acceptable in situations where the enterprise particularly needs production raw materials or materials and thus occupies them.
The commercial form of credit representsthe possibility of deferment, installment payment for the goods or for the work and services performed. This concept also includes various advances, advance payment for goods, work, service. And provides for interest for the use of borrowed funds. Contract forCommercial credit is regulated by Article 823 of the Civil Code of the Russian Federation.
If we compare the commercial andbank credit, the advantages of the former are obvious. Such a transaction is beneficial for both parties. The seller expands the customer base of consumption of his goods, and the buyer acquires the required goods, for which he does not have cash. At the same time, the turnover of both enterprises is increasing. Which is the ultimate goal of such a loan program.
But commercial credit has a minus. First, it is short-lived. Secondly, it is limited to the seller by the quantity of commodity stock, and from the buyer's side - by its creditworthiness. Therefore, to increase the capacity of enterprises are put into circulation to provide credit to a bill and checks. Thirdly, with such a commodity-money circulation, there is a risk for both parties. Due to various situations, the seller may suffer, as the buyer can become bankrupt, and repaying the debt will be a problem for him. The buyer himself is at risk, if the goods are not delivered on time from the seller, the price of the goods may change, which may become an unprofitable transaction.
The interest for each contract is establishedindividually. Sometimes they can not be charged at all, since the contract implies the transfer of money or things. Also, under certain circumstances, interest may be applied as a penalty for failure to fulfill contractual obligations.
It can be concluded that the commercial loan andcommodity loans are concluded on different terms, and one should be careful about the wording. Since the reclassification of one contract into another may result in a fine and a penalty for non-payment of the tax.