This paper presents two further studies on the relationship between trade credit and bank borrowing. First，based on two kinds of classic option theories on corporate liability(Merton，1 974；Leland，1 994)，for the first time as far as we know，we theoretically derive two explicit formulas of elasticity of bank borrowing with respect to trade credit in the cases of default boundaries determined exogenously and endogenously respectively．Substitution between trade credit and bank borrowing and its counter-business-cycle behavior Can be characterized by analysis of those elasticity formulas．Second，using a sample containing totally 5354 lines of data selected from all companies listed in Shanghai and Shenzhen stock markets of China during 1998-2006， we estimate a time-varying coefficients panel model with fixed effects by controlling endogeneity which sires supportive evidences to the existence of substitution between trade credit and bank borrowing in China．More importantly，by Kappa consistency tests，we find the varying behavior of such substitution moves in a coincidently counter-business-cycle manner．This finding implies that firms in the tightening period had better choose a"to-send-charcoal-in-snowy-weather" strategy，and in the loose period，the bottom lines of trade credit policy should be strictly stuck to．