A company can have customers waiting for its products and still struggle to fill their orders if it cannot finance the materials and wages needed to produce them.
Research published by the Bank for International Settlements examines how that need for short-term funding can transmit financial pressure through production networks. Its May 2026 working paper links firms’ use of credit lines and exposure to tighter financial conditions with changes in their sales.
The research helps explain why a change in financing conditions can affect more than the business borrowing money. A supplier that cannot fund production may deliver less to a customer that depends on its components.
The gap between paying and getting paid
Working capital is the difference between a company’s current assets, such as cash and unpaid customer invoices, and its current liabilities, such as supplier bills. In practice, businesses need funding to cover operating costs before they collect cash from sales. A company may pay suppliers and employees weeks or months before a customer settles an invoice.
Some firms bridge that gap with a bank credit line, an arrangement allowing them to borrow up to an agreed limit. An undrawn line is potential funding, not cash already in the bank. Its availability depends on the agreement, the lender’s conditions and the borrower continuing to meet them.
If borrowing becomes more expensive or access to credit tightens, a company may cut orders for materials, delay production or require customers to pay sooner. Each response can pass pressure to another business.
As our reporting on supplier networks and business risk explains, a firm’s position in a chain can shape its exposure to disruption. Finance adds another connection between businesses that may never borrow from the same bank.
What the researchers found
Ryan Banerjee, Hyun Song Shin and Jose Maria Vidal Pastor study firm-level data and links between industries to investigate how working-capital needs interact with financial conditions.
They find that firms’ sales are more sensitive to tighter conditions when they have greater exposure through working capital and production networks. The authors use statistical methods intended to distinguish financing effects from other influences, but the results remain estimates for the firms, periods and measures in their analysis.
A working paper is research circulated for discussion; its findings should not be treated as a forecast for every supplier or an official policy position. The timing and size of a shock will differ across companies and countries.
Why one delay can travel
Consider a food producer that pays for packaging before a retailer pays for finished products. If its financing becomes costly, it might reduce packaging orders even though shoppers continue to buy food.
The packaging supplier may then receive less revenue while still needing to pay for raw materials. If it responds by cutting orders of its own, the effects can spread. This example illustrates a possible mechanism, not a particular business observed in the study.
The chain can work in the other direction too. A customer that takes longer to pay increases the cash a supplier must carry. A larger balance of unpaid invoices can make the supplier more dependent on external finance.
What businesses can check
A sales forecast is only part of a cash plan. A business can also map when it must pay for materials, labor and shipping against when customers are expected to pay. This reveals how much funding a period of growth might require.
Managers can review the limits, interest costs, renewal dates and conditions attached to credit facilities. They can also consider what would happen if a major customer paid late or a lender reduced an available line. These are planning questions, not a guarantee that any particular borrowing strategy is suitable.
Reducing payment delays, diversifying funding sources and agreeing realistic payment terms with suppliers may reduce some exposures. Each option has costs: holding more cash can limit investment elsewhere, while demanding faster payment may strain customer relationships.
Implications for the wider economy
Financial conditions can tighten through changes in interest rates, lender risk appetite or access to funding. The effects are not limited to investment in new factories or equipment. They can also influence the money used to keep existing production moving.
The BIS study does not imply that all firms should borrow more or that every disruption starts in the financial system. Demand, transport problems and input shortages matter too.
Its contribution is to show why financing arrangements deserve a place in supply-chain planning. A business may depend on its suppliers’ ability to fund operations as much as it depends on their ability to make the right product.
