Recent behaviour of the trade credit of non-financial firms in Spain

Trade credit is a financing instrument arising from the deferral of payment in a transaction for the purchase of goods or for the provision of services, the lender and the borrower corresponding to the seller and purchaser, respectively.1 Most of these financial flows take place within the sector of resident non-financial corporations, which finance each other in this way, although part of these flows feeds through to credit granted by these firms to other sectors, such as households, general government and the rest of the world. The quantitative importance of this type of financing has declined over the course of the crisis, but remains high. In 2014, the outstanding amount of trade credit received by Spanish non-financial firms was equivalent to 33% of GDP and to 54% of bank financing to firms. The study of trade credit is therefore of interest from the point of view of macroeconomic stability (since greater or lesser access to this source of financing may affect the investment and hiring decisions of firms) and from the point of view of financial stability (given that intercompany debt may be another channel for transmitting shocks between companies). This article analyses the behaviour of trade credit in Spain between 2007 and 2014.2 To do so it uses both aggregate data obtained from the financial accounts of the Spanish economy and microeconomic data of the Central Balance Sheet Data Office (CBSO).3 This means that a breakdown by industry and company size can be made and the statistical distribution of different indicators obtained. By contrast, the counterpart institutional sectors (households, non-financial corporations, general government, the rest of the world) of the trade finance granted by firms are not studied, since there is no breakdown available at the individual level. In addition to this introduction, the article has three sections. The first describes the behaviour of total trade credit over the last few years, the second analyses the average periods for paying suppliers and for collecting from customers and the third summarises the main conclusions.