Demand for Trade Credit: An Investigation of Motives for Trade Credit Use by Small Businesses

摘要

Trade credit-credit extended by a seller who does not require immediate payment for delivery of a product-is an important source of funds for business customers. In 1987, such credit accounted for about 15 percent of the liabilities of nonfarm nonfinancial businesses in the United States, approximately the same percentage of liabilities as these firms' nonmortgage loans from banks. Trade credit apparently is especially important for small businesses: In the same year, it accounted for about 20 percent of small firms' liabilities. This paper presents new evidence on small businesses' motives for using trade credit based on data from the National Survey of Small Business Finances, a nationally representative survey of firms with fewer than 500 employees. The survey gathered information on the trade credit use and payment practices of a large segment of the business population not covered by most sources of financial data on businesses. We developed a model of demand incorporating the transaction and financing motives and, using the model, analyzed small businesses' decisions about using trade credit at all, making late payments on trade credit, and the amount of trade credit to use. The results of our analysis, which support the existence of both a transaction and a financing motive, provide insights on the substitutability of trade credit and institutional credit and on the relative importance of the two motives in the use of trade credit by small businesses.