About one-quarter of trade-credit obligations are paid late, and larger buyers pay later than smaller ones. Using granular Dun & Bradstreet payment records, we show that this delay is selective: larger firms delay a greater share of invoices, but not a greater share of dollars, and the invoices they delay are disproportionately small. We develop a dynamic model in which downstream buyers source from heterogeneous, relationship-specific suppliers and optimally stretch payables, trading off the working-capital benefits of delay against the risk of disrupting valuable supplier relationships. We estimate the model by simulated method of moments, targeting moments on payment behavior and buyer–supplier relationship dynamics. Motivated by prompt-payment regulation such as the EU Late Payment Directive, we evaluate a mandate requiring on-time payment. The mandate lowers the exit rate of incumbent suppliers from 6.6 to 2.2 percent, but it shifts the working-capital burden onto buyers, raising their financing needs by 25 percent. Buyers respond primarily by accumulating precautionary cash, but this adjustment does not fully absorb the shock: they shrink their supplier networks by 4 percent and reduce input order sizes by 4.2 percent. These extensive and intensive margin adjustments reduce output by 4.1 percent. Prompt payment regulation therefore protects incumbent matches but shrinks the overall supply base and contracts real activity.