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The Use of Trade Credit by Businesses

Author

Listed:
  • Amy Fitzpatrick

    (Reserve Bank of Australia)

  • Bobby Lien

    (Reserve Bank of Australia)

Abstract

Trade credit is an important source of funding for some businesses, particularly those in the unlisted business sector. Nonetheless, little is known about the use of trade credit owing to the paucity of data. This article explores the use of trade credit, as well as the terms and conditions of trade credit contracts. It also examines the relationship between trade and bank credit. Understanding the nature of this relationship provides useful insights into how changes in financial conditions will affect the overall funding of businesses.

Suggested Citation

  • Amy Fitzpatrick & Bobby Lien, 2013. "The Use of Trade Credit by Businesses," RBA Bulletin (Print copy discontinued), Reserve Bank of Australia, pages 39-46, September.
    • Handle: RePEc:rba:rbabul:sep2013-05
    as

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    File URL: https://www.rba.gov.au/publications/bulletin/2013/sep/pdf/bu-0913-5.pdf
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    References listed on IDEAS

    as
    1. Mike Burkart & Tore Ellingsen, 2004. "In-Kind Finance: A Theory of Trade Credit," American Economic Review, American Economic Association, vol. 94(3), pages 569-590, June.
    2. Biais, Bruno & Gollier, Christian, 1997. "Trade Credit and Credit Rationing," The Review of Financial Studies, Society for Financial Studies, vol. 10(4), pages 903-937.
    3. Love, Inessa & Preve, Lorenzo A. & Sarria-Allende, Virginia, 2007. "Trade credit and bank credit: Evidence from recent financial crises," Journal of Financial Economics, Elsevier, vol. 83(2), pages 453-469, February.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

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    2. Rose Kenney & Gianni La Cava & David Rodgers, 2016. "Why Do Companies Fail?," RBA Research Discussion Papers rdp2016-09, Reserve Bank of Australia.
    3. Xia, Chuanxin & Xiao, Yujie & Zhuo, Wenyan & Hsiao, YuJen, 2020. "Mixed financing strategies for capital-constrained retailer in the Chinese financial market," Pacific-Basin Finance Journal, Elsevier, vol. 63(C).
    4. Annalisa Ferrando, 2015. "Discussion of The Dynamics of Trade Credit and Bank Debt in SME Finance: International Evidence," RBA Annual Conference Volume (Discontinued), in: Angus Moore & John Simon (ed.),Small Business Conditions and Finance, Reserve Bank of Australia.
    5. Johari, Maryam & Hosseini-Motlagh, Seyyed-Mahdi, 2022. "Evolutionary behaviors regarding pricing and payment-convenience strategies with uncertain risk," European Journal of Operational Research, Elsevier, vol. 297(2), pages 600-614.
    6. Tsao, Yu-Chung, 2017. "Managing default risk under trade credit: Who should implement Big-Data analytics in supply chains?," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 106(C), pages 276-293.
    7. Yu-Chung Tsao & Qinhong Zhang & Hui-Ping Fang & Pei-Ling Lee, 2019. "Two-tiered pricing and ordering for non-instantaneous deteriorating items under trade credit," Operational Research, Springer, vol. 19(3), pages 833-852, September.

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