IntroductionResearch has acknowledged that small and medium size enterprises (SMEs) play vital role in the private sectors of many countries around the world. Also, it has been acknowledged that these enterprises are usually confronted with lack of access to external finance (Beck and Demerirguc-Kunt, 2006). Due to frictions such as information asymmetries, agency problems, and differential tax rates that may exist among them and investors/lenders, they are particularly excluded from having access to finance from formal financial institution such as commercial banks. Consequently, in order to avoid the under-investment problem and to have financial flexibility, they used trade credit (TC) as an alternative source of financing.Trade credit is an arrangement between a buyer and a seller by which the seller allows delayed payment for its products instead of cash payment. Ferris (1981) describes it as a loan tied in both timing and value to the exchange of goods. Under credit market imperfection, Lewllen et al. (1980) suggested that firms can use it as an important source of financing to influence on its value. In order to verify this relationship, empirical studies undertaken in various contexts yielded contradictory results. While some pointed out a positive relationship (