Final answer:
Trade credit is a short-term financing option where businesses purchase goods or services with the agreement to pay suppliers in the future. It is used by many businesses, regardless of size, and is not a long-term financing solution nor a loan from banks.
Step-by-step explanation:
businesses to purchase goods or services on account
Trade credit is a form of short-term financing that enables businesses to purchase goods or services on account, without immediate cash payment to suppliers. It is essentially an arrangement to buy now and pay later, typically within 30 to 90 days. This flexibility makes trade credit a widely utilized financial tool by businesses of all sizes, not just small enterprises. It is not money borrowed from banks, nor is it a source of long-term financing.
Trade credit is not money borrowed from suppliers (option A), as it does not involve a formal borrowing arrangement. Trade credit is also not limited to small businesses (option C), as it is commonly used by businesses of all sizes. It is important to note that trade credit is not a source of long-term financing (option D), as it is typically used for short-term transactions. Furthermore, trade credit involves borrowing from suppliers, not from banks (option E).