Dual credit channels for supply chain financing with a guarantee

A supply chain financing system when the retailer is capital constrained under demand uncertainty was studied. Considering that the manufacturer provides part of the trade credit, the retailer has to access the loan from the bank(bank credit). Different from extant literatures, the manufacturer offers a credit guarantee for the loan the retailer borrows from the bank (trade credit). Their strategic interaction was modelled as a Stackelberg game with the manufacturer acting as the leader. And the manufacturer decides the credit proportion. The dual credit channels create a higher value for the manufacturer than the single credit channel under some circumstances. This is well demonstrated by numerical examples. An optimal credit proportion may not always equal 0 or 1, which implies that an integration of the two credits can benefit the supply chain effectively.