Opaque firms turn to trade credit when banks won't lend, impacting SMEs.
The study looked at how small businesses in Italy use trade credit when they can't get traditional bank loans. They found that when banks don't give loans based on relationships, businesses rely more on trade credit. This is because trade creditors can better understand soft information about the business. The results vary based on the type of business, the bank, and how many banks the business works with.