An Empirical Research On The Relationship Between Trade Credit And Bank Credit When SMEs Financing

Nowadays, SMEs have been important force in promoting the development of society and economy around the world. However, the problem of financing has been always restricting the development of SMEs. One of the most important financing channels of SMEs is bank credit, but owing to the credit rationing from banks, many SMEs can hardly obtain enough financing from banks. As being another effective financing channel of SMEs, trade credit has been received more and more attention from scholars in recent years. Comparatively, there are many differences between these two kinds of financing channels. For example, the main suppliers of trade credit are suppliers of SMEs while the main suppliers of bank credit are banks; the term of trade credit is currently short while the term of bank credit is comparatively long; the per sum of trade credit is small while the per sum of bank credit is comparatively big. Most importantly, trade credit is a kind financing reflected by the indirect commodity goods borrowing, however, bank credit is a kind of financing reflected by the direct money borrowing. These differences may influence the selection of financing channels of SMEs.Prior studies of Western scholars have showed that there are substitution or complementary relationships between trade credit and bank credit when SMEs financing. The main reason of substitution relationship is that SMEs are vulnerable to bank credit rationing, SMEs will increase dependence on trade credit when they can hardly obtain sufficient financing from banks. That is trade credit can replace bank credit to satisfy the partial demand of financing of SMEs. And the complementary relationship is probably caused by the function of signaling of trade credit. Due to the function that trade credit can act as a screening mechanism, receiving more trade credit will facilitate access of SMEs to bank financing. Moreover, there are also some scholars who have found that relationships of substitution or complementary between trade credit and bank credit may exist simultaneously. As being two of the most important external financing channels of SMEs, the relationship between trade credit and bank credit may probably influence the effect of enterprises’ financing. What’s more, owing that trade credit can substitute or complement bank credit, the relationship between trade credit and bank credit may also influence the effect of monetary policy. Therefore, the paper focuses on the specific relationship between trade credit and bank credit, and making the theoretical, status quo and empirical analysis, then put forward some suggestions according to conclusions, which hopes to provide some valuable reference for others’ research and policy implementation.The paper is divided into five parts:the first part is introduction, mainly introducing the problem and significance of this research, and describing the objects of the study, research contents, methods, and innovation and weaknesses; the second part is the literature and theoretical analysis, in this part related literature and theories were elaborated; the third part is the status quo analysis, first collecting data of the sample of SMEs through a questionnaire survey, then making statistical analysis of the data to deepen the understanding of the problem and provide the real base for the following empirical analysis; the forth part is the empirical analysis, which is also the focus of the paper, first proposing the study hypothesis, then using the empirical method to test the relationship between trade credit and bank credit; the fifth part is conclusion and suggestions. One of the major conclusions of the paper is that in China the relationship between trade credit and bank credit is mainly demonstrated by substitution while the complementary relationship is not notable. And after splitting the samples into different parts and making empirical analysis, we still could not find the existence of the complementary relationship. Which means, in China the function of signaling of trade credit may not exist, the dependence of trade credit of SMEs is mostly due to credit rationing from banks. According to the conclusions mentioned above, the paper lastly proposed some suggestions to solve the financing problems of SMEs respectively from trade credit and bank credit aspects.