The level of trade receivables
If there is a substantial amount of capital tied up in trade receivables then the policy may be aimed at reducing the level of investment by not granting credit as freely as before or shortening the credit terms. The cost of trade credit Where the cost of trade credit(including opportunity costsis higha company will want to reduce thelevelofinvestmentintradereceivables.

Competitor trade terms

Unless a company can differentiate itself from its competitorsit will need to at least match the credit terms offered by itscompetitors toavoid aloss ofcustomers.

Liquidity needs
Where a company needs to improve its liquidityit may want to reduce credit terms or consider debt factoring or invoice discounting.

Risk appetite
Acompany may be prepared to risk higher levels of bad debts byoffering credit terms that are relatively relaxed as this will increase salesvolume.

Expertise in credit management
If a company lacks expertise in credit managementparticularly in monitoring the level of receivables, then it may choose to factor its debts.