The U.S. Small Business Administration’s Office of Advocacy has released a study that examines how small businesses use credit.
Of particular interest to businesses considering the best way to access credit, the study identifies the importance of trade credit–vendor-provided financing–as a complement to traditional bank credit. Each type of financing has characteristics that lead certain types of companies to them. For example, businesses using trade credit have relatively lower credit scores than those using bank credit, likely because banks are more hesitant to lend to businesses with bad credit scores. Similarly, businesses that avoid using any type of credit tend to be small, likely because they have not used credit to finance rapid expansion of their businesses.
