Short-Term Debt Financing During the Financial Crisis
Richard H. Fosberg

Abstract
The financial crisis of the late 2000s had a large effect on the capital and lending markets in the United States and overseas. The data presented here show that the financial crisis caused firms to increase the amount of short-term debt they employed from 1.3% of assets in 2006 to 2.2% in 2008. This increase in short-term debt financing was completely reversed by the end of 2009 suggesting that the increase in short-term debt financing was undesired and was reversed as soon as the financial crisis abated. The proximate causes of the spike in short-term debt financing include a reduction in accounts payable financing from suppliers and a decline in longterm debt and equity financing. A significant decrease in asset sales also contributed to the need for more shortterm debt financing. A regression analysis indicated that almost all of the increase in short-term debt financing was caused by the financial crisis and not the simultaneous recession.

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