This paper investigates the real effect of short-term financial constraints on small and medium-sized enterprises (SMEs). Under the working capital channel, cash credit constraints force entrepreneurs to forgo investment opportunities in order to finance their working capital needs. Building on survey data, I find that short-term credit constraints are as important as long-term ones in SMEs’ investment decisions. Besides, the detrimental effect of cash credit constraints on corporate investment is stronger for SMEs with higher increase in working capital needs but lower for liquid ones that are able to adjust their accounts receivable and inventories. My results suggest that short-term finance is a major issue for SMEs.

Plain English Summary

Short-term credit constraints turn out to be as important as long-term ones in SMEs’ investment decisions. Building on survey data, this paper investigates the real effects of short-term financial constraints on small businesses through an under-explored transmission mechanism. While the bulk of research on the effects of financial constraints focuses on long-term liabilities, I stress the importance of short-term finance. Owing to the competition between working and fixed capital in cash-flow uses, cash credit constraints force entrepreneurs to allocate additional cash-flow to finance the increase in their working capital needs to the detriment of long-term assets.The main implication of this work is that supports for short-term financing would provide a significant boost to long-term investment and economic growth.

本文研究了短期财务约束对中小企业（SME）的实际影响。在营运资金渠道下，现金信贷约束迫使企业家放弃投资机会来满足其营运资金需求。根据调查数据，我发现短期信贷约束在中小企业的投资决策中与长期信贷约束同样重要。此外，现金信贷约束对企业投资的不利影响对于营运资金需求增幅较大的中小企业而言更大，但对于能够调整应收账款和库存的流动性企业而言则较小。我的研究结果表明，短期融资是中小企业的一个主要问题。

 简单的英语摘要

事实证明，在中小企业的投资决策中，短期信贷约束与长期信贷约束同样重要。本文以调查数据为基础，通过尚未探索的传导机制研究短期财务约束对小企业的实际影响。虽然关于财务约束影响的大部分研究都集中在长期负债上，但我强调短期融资的重要性。由于流动资本和固定资本在现金流使用上的竞争，现金信贷约束迫使企业家分配额外的现金流来为其流动资本需求的增加提供资金，从而损害了长期资产。这项工作的主要意义短期融资支持将有力促进长期投资和经济增长。