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# System prepended metadata

title: Trade credit

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# Trade credit

* [Trade credit](https://www.accaglobal.com/gb/en/business-finance/types-finance/trade-credit.html) article from ACCA - 'Trade credit is probably the easiest and most important source of short-term finance available to businesses.'
* [Trade Credit: Theory and Evidence](https://www.researchgate.net/publication/5216727_Trade_Credit_Theory_and_Evidence)
* [A Note on the Price of Trade Credit](https://www.emerald.com/insight/content/doi/10.1108/03074351111134754/full/html) - 'In contrast to common literature that suggests that trade credit is an extremely expensive source of financing with annual interest rates exceeding 40 percent, this paper argues that the average interest rate of trade credit does not exceed the cost of alternative funds, with estimated average interest rates of 4 to 6 percent, thereby explaining why trade credit constitutes a substantial part of the optimal financing mix also of large, liquid, and capital market listed firms.'
* [Trade credit insurance](https://en.wikipedia.org/wiki/Trade_credit_insurance) (Wikipedia article).
* [Suppliers reluctant to ship goods without credit insurance](https://web.archive.org/web/20200906200618/https://apnews.com/5298671099cfadcb9896c660d863dc23) - 'Before COVID-19, suppliers routinely relied on so-called trade credit insurance... Now, with the pandemic creating so much economic uncertainty, many retailers are struggling and credit insurers are unwilling to take on the risk. In fact, many insurers will only provide protection on orders to big box stores and others that have been able to withstand the pandemic, leaving in the lurch a huge swath of non-essential small and medium retailers that are still trying to claw their way out of months of lockdowns that decimated their businesses. Trade credit insurance provides a financial backstop for at least $600 billion in annual U.S. sales... Without the safety net, these suppliers — 60% of which have revenues of $20 million or less, according to Litan — are starting to make hard choices about whether to maintain their current production level or cut back on orders to minimize the risk, experts say.'
* [£5bn government trade credit scheme is branded a failure](https://www.accountancyage.com/2009/12/03/5bn-government-trade-credit-scheme-is-branded-a-failure/).
* [The Implicit Costs of Trade Credit Borrowing by Large Firms](https://www.semanticscholar.org/paper/The-Implicit-Costs-of-Trade-Credit-Borrowing-by-Murfin-Njoroge/02cda578f28badfb36817da063a8382dc1755bde?p2df) - 'We examine a novel, but economically important, characterization of trade credit relationships in which large investment-grade buyers borrow from their smaller suppliers. Using a matched sample of large retail buyers and their much smaller suppliers, we find that slower payment terms by large retailers are associated with lower investment at the supplier level. The effects are sharpest during periods of tight bank credit and for firms which we might otherwise characterize as financially constrained. The opportunity cost of extending credit to large buyers appears to be positive and sharply increasing in the financial frictions facing a firm.'


## Resources with commentary

* [Trade credit and its role in entrepreneurial finance](https://workflowy.com/#/a812592f4d76) 