The Importance of Payment Credit Terms Within the Financing of US Private SMEs: The Impact of Reliance, Relationships, and Accounting Information

This paper investigates the role of financial reporting and supplementary information in shaping payment credit terms decisions among privately held small and medium-sized enterprises (SMEs) in the United States (US). Unlike prior studies focused on public or international firms, this research centers on US SMEs and offers two key contributions: (1) a critical review of global and US specific factors influencing payment credit terms, and (2) empirical insights from interviews with owner-managers and accounting professionals from 39 US SMEs. The findings highlight that credit decisions are informed not only by formal accounting data but also by interpersonal trust and contextual judgment. In addition, a lack access to capital from more traditional sources increases the overall importance of payment credit terms, making the efficient management of accounts payables and receivables critical, and altering styles of communication both within and outside of the company due to a focus on social capital and contingency factors.