There are a number of advantages to selling to a publicly traded company
in the U.S., including these:
Financial visibility based on the quarterly reporting requirements
mandated by the SEC
Audit requirements [also from the SEC]
The fact that public traded companies take substantially higher
risks if they present fraudulent financial statements... which is
a crime under the U.S. Securities and Exchange Act]
The fact that a publicly traded company must disclose material
events of interest to investors and creditors soon after they occur
[using SEC form 8K] rather than waiting for the end of the quarter
to announce the change or problem.
The fact that some publicly traded companies are able to raise
cash by selling corporate bonds [in effect, corporate IOUs]
The fact that public companies can also raise cash by selling
Access to detailed footnotes as well as narrative commentaries
about the company's past financial performance, and its future prospects
Financial statement analysis on many publicly traded companies
can be obtained on line at no cost - saving trade creditors time
Stock and financial analysts often publish their expert opinions
about public companies for the benefit of anyone who wants to know
more about the companies
A public company's stock price is a barometer of the company's
financial health as well as its future prospects. Specifically, a
significant or precipitous drop in the value of a company's stock
might indicate credit problems for the company in the short term.
Creditors have access to readily available news and press reports
Rating agencies [in particular bond rating services] provide ratings
on public companies that trade creditors can use as an early warning
system for potential financial problems.
It is possible to track the status of scheduled debt payments.
Insider trading may be used as a harbinger of problems or successes
There is more information about the company's competition, and
more data about industry trends and possibly about industry norms.
The disadvantages of selling to a publicly traded company cam include
each of the following:
Trade creditors can become overconfident and complacent because
they are selling to a publicly traded company... possibly even a
Audited financial statements could still be inaccurate, or even
Press releases made by the company could be misleading
It is not uncommon for a large public company to flex its muscles
and try to strong-arm trade creditors into making concessions the
creditor would not make to a smaller or less important customer.
It is possible that off balance sheet financing may be hidden
from trade creditors and others.
It is possible that stock analyst may be hyping the stock.
There is an assumption among trade creditors that public companies
do not fail or file for bankruptcy protection. That assumption is
Some public companies have complex debt structures --- hiding
debts in affiliates, subsidiaries, holding companies and shells.
Trade creditors may not have the time, or the expertise to understand
the complexities of such a company's financial reports and as a consequence
may be accepting more credit risk than the creditor was aware of.