Trade Credit and Financing Instruments

CHAPTER 3

Trade Credit Financing Instruments

Introduction

In light of multiple motivations for the use of trade credit, firms tend to supply and receive trade credit at the same time, so the choice to engage in one of these activities could influence the other. Nonetheless, the mismatch between the terms of accounts receivable and payable can determine financial needs to be satisfied through external sources, as revealed by the vast complementary usage of trade debt and financial debt and the weak ability of firms to substitute bank credit with trade credit due to the different nature of the sources, particularly during crisis periods. External sources that can satisfy financial needs connected with the extension of trade credit pertain to both ...