The significance of trade credit for micro and small enterprises

Abstract

Purpose – This paper aims to assess the significance of trade credit – as a source of finance – for micro and small enterprises in Poland. Design/methodology/approach – This article reviews literature related to trade credit use by enterprises, with particular attention paid to its significance for micro and small businesses. The paper employs data from the Central Statistical Office of Poland (CSO) to assess the scale of trade credit use by small businesses in Poland. In this paper, the author also presents the results of her own research conducted on a sample of micro-enterprises from Lubelskie Province. Findings – Analysis of CSO data confirms the significant position of liabilities from deliveries and services in the short-term liabilities of small enterprises in Poland. The results of the author’s own research provide evidence that trade credit is of significant importance to its users. Analysis of reasons for not using trade credit by micro-enterprises suggests their mainly demand-side nature. Originality/value – Although the use of trade credit is widespread and it has been the subject of comprehensive research, there is a shortage of studies investigating trade credit use by micro and small enterprises in Poland. By empirically examining this issue, this article makes a contribution to the literature on trade credit.