The Role of Trade Credit in Activities of Small and Medium-Sized Enterprises

Ekaterina A. Panova ()
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Ekaterina A. Panova: State University of Management, Moscow 109542, Russian Federation

Finansovyj žhurnal — Financial Journal, 2020, issue 6, 126-135

Abstract: Trade credit has a special meaning for small and medium-sized enterprises (SMEs). When they act as a supplier, it allows them to increase sales and cash flows, and helps establish and maintain permanent relationships with clients. Deferred payment provision is a tool for non-price competition, giving a client time to make sure of product quality. Trade credit as a financial source is an important alternative to bank lending. The article is devoted to studying the determinants of accounts payable in Russian industrial SMEs. It is based on the financial indicators calculated using the SMEs’ accounting statements for the period 2010–2018, published by Rosstat. The statistical data analysis has led to the conclusion that accounts payable are the main borrowed financial source for Russian industrial SMEs. The results of the regression analysis demonstrate a direct dependence of the accounts payable amount on sales growth and a reverse dependence of the former on the liquidity both in small and medium enterprises. Small businesses are also characterized by a negative relationship between return on sales and the accounts payable amount.

Keywords: small and medium-sized enterprises (SMEs); trade credit; accounts payable; borrowed funds; capital structure; regression analysis (search for similar items in EconPapers)
JEL-codes: G32 L14 L60 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:fru:finjrn:200609:p:126-135

DOI: 10.31107/2075-1990-2020-6-126-135

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