This paper investigates how various aspects of firm-level financial distress affect the adjustment of trade credit usage in short-term debt financing in Korea. There is a general notion that trade credit is considerably more expensive than short-term bank financing (revolving line) and commercial paper, as trade credit is preferred by the firms facing obstacles to obtain financing from banks and capital market. In corporate debt financing, it is prevailing wisdom that the reliance on trade credit increases with the degree of financial distress. This paper confirms this and shows that bilateral trade credit debt contract is substitute for bank revolving line and commercial paper, which are all market-based financing instrument. This paper also provides finding that trade credit is pro-cyclical in Korea.