Trade credit is a form of credit provided by selling firms in connection with real commercial transactions, and from the purchasing firm's perspective, it constitutes a borrowing form that can substitute for bank credit. This study theorizes the economic incentives and structural characteristics of trade credit creation in terms of its differentiation from bank credit. Under the assumption of imperfect intermediate and capital goods markets, selling firms pursue increased sales and profits through the provision of trade credit, driven by the economic incentive to capture additional positive price-cost margins that exist due to market imperfections, thereby enhancing profits. The study analyzes how trade credit is provided through the economic incentive of selling firms to increase sales and profits by extending credit to borrowing firms that have high credit risk and find it difficult to obtain credit from the banking sector. Consequently, the credit screening standards for trade credit are lower than those for bank credit, and the study theorizes the stylized fact of high default risk in trade credit observed in corporate finance markets. Reflecting the Korean corporate finance environment, this study analyzes how trade credit can be utilized as a tunneling mechanism in internal transactions among chaebol-affiliated firms, and demonstrates that introducing credit insurance to stabilize the high credit risk in trade credit transactions within the small and medium enterprise sector can promote the expansion of credit transactions and the stabilization of corporate earnings.