Trade credit represents a substantial portion of short-term credit for most firms. A trade credit decision is usually limited to a comparison of the effective cost of trade credit with the annual cost of borrowing. If the cost of not taking the cash discount exceeds the firm’s borrowing cost, the decision is to take the cash discount. This article examines traditional trade credit analysis, and...

This paper first examines various definitions of Kornai’s soft budget constraint (SBC) and the difficulties involved in interpreting data on losses, subsidies and financing, and then considers selective evidence from transition economies. Stocks of overdue trade credit are no larger than in Western economies and firms in transition economies (TEs) typically impose hard budget constraints on eac...

How do the smallest firms in Mexico finance their operations? We examine this question using data from surveys of microenterprises undertaken in 1994 and 1998. The survey identifies sources of startup capital, and also provides information on current bank loans and access to trade credit from suppliers. There is evidence that the credit crunch experienced by Mexico in the second half of the 199...

Farm Credit markets in the United States are excellent testimony to high performance over the long term in providing credit and related services to the farm sector, and to timely innovation of new financial institutions, instruments, and practices for meeting farmers' capital and credit needs. These markets evolved from strong reliance a century ago on country or frontier,banks, local merchants...

Large number of researcher papers has been published for inventory lotsize models under trade credit financing by assuming that demand rate is constant. But demand rate is often not constant. During the growth stage of the product life cycle, the demand function increases with time. In this paper we extend the constant demand to timedependent demand. This paper derives the problem of determinin...

While the benefits of bank financing are relatively well understood, the costs are not. This paper argues that while informed banks make flexible financial decisions which prevent a firm's projects from going awry, the cost of this credit is that banks have bargaining power over the firm's profits, once projects have begun. The firm's portfolio choice of borrowing source and the choice of prior...

CHALLENGES TO AGRICULTURE FINANCING IN MALI By Kadidia Konare In Mali, like in many Sub-Saharan countries, inadequate access to credit has remained a central concern for farmers and a key constraint to the modernization and diversification of their activities. The commercial banks’ limited participation in agricultural financing and the hard terms and conditions for obtaining individual loans h...