This paper offers a framework to understand informal financing based on mechanisms to deal with asymmetric information and enforcement. We find that constructive informal financing such as trade credits and family borrowing that relies on information advantages or an altruistic relationship is...

Family, social and business connections create implicit benefits between borrowers and lenders. We model how these benefits influence credit allocation, cost, and renegotiation between the borrower and the lender in case of delinquency. The optimal solution illustrates that financing with...

Social relationship and business connections create implicit benefits between borrowers and lenders. We model how implicit benefits and repayment enforcement costs influence credit allocation, cost, and renegotiation. The optimal solution illustrates that financing with implicit benefits can in...