Rural small business trade credit: a paradox

Abstract

This article examines trade credit practices of rural small business firms. The results show that these firms borrow money and then re‐lend it to others in the form of trade credit. There is a strong direct relationship between various forms of debt held by these firms and their level of accounts receivable (e.g., trade credit extended to customers). The actual level of re‐lending varied among firms depending on their adoption level of computer usage for cash management and credit services. Accounts receivable balances were also dependent on sales levels, costs of doing business, and other income.