Supplier relationships and small business use of trade credit

This paper establishes some unique descriptive statistics about supplier relationships and the use of trade credit among minority small businesses and documents the importance that ethnic and geographic supplier ties play. Using data from a survey of small businesses in two Chicago neighborhoods, we find that the importance may differ across communities. Working with a nearby supplier and, in cases where language appears to be an issue, with a Hispanic supplier are associated with more credit for Hispanic-owned firms. However, no comparable relationships are observed for Black-owned firms. These patterns are generally confirmed using nationally representative data. In addition, the national data suggest that ethnic differences in trade credit outcomes can be partly accounted for by the presence of ethnic- and geographic-based supplier relationships. (C) 2004 Elsevier Inc. All rights reserved.