Think of it as trade credit. The rationale for much of trade credit is that the supplier knows a great deal about the firm, so they are able to make a well-informed lending decision [0]
In contrast, banks may not know much about firms (or only know obsolete information), so the usual information asymmetry [1] issues arise
Comments
Think of it as trade credit. The rationale for much of trade credit is that the supplier knows a great deal about the firm, so they are able to make a well-informed lending decision [0]
In contrast, banks may not know much about firms (or only know obsolete information), so the usual information asymmetry [1] issues arise
[0] http://rfs.oxfordjournals.org/content/10/3/661.short [1] http://en.wikipedia.org/wiki/Information_asymmetry